Hearing of the Government Management, Organization, and Procurement Subcommittee of the House Oversight and Government Reform Committee - The United States Agency for International Development (USAID): Management Challenges and Strategic Objectives

HEARING OF THE GOVERNMENT MANAGEMENT, ORGANIZATION, AND PROCUREMENT SUBCOMMITTEE OF THE HOUSE OVERSIGHT AND GOVERNMENT REFORM COMMITTEE

SUBJECT: THE UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID): MANAGEMENT CHALLENGES AND STRATEGIC OBJECTIVES

CHAIRED BY: REP. DIANE E. WATSON (D-CA)

WITNESSES: MIKE WALSH, INSIDE NGO; JAMES KUNDER, FORMER DIRECTOR, USAID; GEORGE INGRAM, VICE PRESIDENT, AED

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REP. WATSON: I'd like to call to order the hearing on the Subcommittee on Management, Organization and Procurement -- and also, we include Government Oversight -- will come to order. Today's hearing will examine the short and long-term management challenges and strategic objectives of the U.S. Agency for International Development as it contends with ever increasing portfolio -- of foreign assistance needs and geopolitical objectives.

Without objection, the chair and the ranking minority member will have five minutes to make opening statements followed by opening statements not to exceed three minutes by any other member who seeks to be recognized. Without objection, members and witnesses may have five legislative days to submit a written statement or extraneous materials for the record.

Today we are holding this hearing on the United States Agency for International Development (USAID), its management challenges, and strategic objectives. USAID is the lead federal agency that directs and manages U.S. development assistance programs. Over the past decade, USAID's role has been expanded to meet the many new challenges of the post-Cold War and 9-11 world. Reflecting the newfound importance of our nation's foreign assistance program, UAID's budget and responsibilities have been significantly enhanced over the past decade. Furthermore, the growing importance of the agency's mission is articulated in the President's evaluation of development to a theoretically equal footing with defense and diplomacy as part of the three D's of U.S. national security policy.

The question arises as to whether USAID is equipped to meet the new set of challenges. Many believe it's not and that the agency lacks a clearly defined development strategy and suffers from significant management and human capital challenges and program duplication and overlap. I'm struck, for example, by the number of United States government agencies that planned and implement foreign assistance programs. They have become so numerous that the Department of State and USAID control a little over half of the U.S. foreign assistance budget. Taken alone, USAID -- it is my understanding -- manages just over 40 percent of the total U.S. foreign assistance budget.

The proliferation of foreign assistance programs throughout the U.S. government has resulted in a patchwork of different programs with different strategic objectives. Many, if not most, of these programs are important and beneficial, but I'm concerned that there's a lack of coordination to ensure that the full benefits of these programs are realized.

If USAID were in counseling, I would observe that it is a patient that suffers from serious identity issues. In effect, USAID has become everything to everyone. Each year, USAID is given new marching orders and budget authority. The program is that there is no -- and the problem is that there is no programmatic consistency for meeting the agency's long-term strategic goals and objectives. Programs may take years to implement on the ground, but the agency's legislative authority may not reflect the realities of implementing programs on the ground.

USAID's development strategy and strategic objectives may be further blurred by the semi-merger in 2006 of the Department of State and USAID, and as a result of the creation of the (S Bureau ?) and the director of foreign assistance at State, USAID and State share identical strategic goals. The question arises now -- are USAID's strategic goals too broad and over sized? Are we muddling foreign policy objectives with development objectives? Clearly, USAID's problem, if we are completely honest, are in part the making of ourselves, Congress. Many of us are aware that Congress has not passed a foreign assistance authorizing bill since 1985. In effect, the Authorizing Committee has been marginalized.

So I applaud and fully support Foreign Affairs Committee Chairman Berman's efforts to overhaul the antiquated Foreign Assistance Act of 1961 and to reinvigorate the authorization process. I believe the success of these efforts will have direct bearing on the future viability and success of the program.

To date, the Administration has not named a new administrator for USAID. It is my sincere hope that the Administration will name the new administrator as soon as possible. And let me assure my colleagues on the subcommittee that I intend to hold a follow-up hearing on USAID and invite the new administrator to testify once he or she has been put in place. And finally, I want to thank all the witnesses that are here today for taking time to appear before our subcommittee. Most of them have decades of experience working at USAID and have devoted their careers to development work. And I look forward to their comments on a issue that is sometimes overlooked by Congress, but is nonetheless an essential element of our nation's foreign security status.

All right. The ranking member?

REP. BRIAN BILBRAY (R-CA): Thank you. Madam Chair, to expedite the process, I'd like to introduce my opening statement with a written form please, and --

REP. WATSON: Without objection.

REP. BILBRAY: Without objection. Thank you. But let me just say, though, in -- briefly I think USA -- I mean AID -- has a long history of service around the world. I think that, frankly, historically has taken what's thrown at them and responded as best they could. Let me say, though -- getting back to this issue of building on the concept of teaching people to fish rather than give them fish -- my biggest concern is that there may be a lot of fault for USAID for problems that we face today. A lot of it may not be rightfully pointed out at -- thank you, Madam Chair -- the -- at the organization because, like the chair pointed out, there's a whole lot of other agents out there under the guise of USAID.

And I think that one of the things that I would ask us to take a look at is the -- where are we going long-range with this? And let me just say this to the gentleman here. You have a Democrat and Republican standing in front of you. We have a new Administration that doesn't even have a head yet. I would like these hearings to be set as a proactive process rather than a reactive judgment. The proactive process of pointing out to the new Administration the pitfalls and mistakes in the past, the opportunities and successes of the past, so they can avoid those pitfalls and take advantage of the opportunities.

And I hope all of you approach this very attitude, that here's a chance for your information and your experience, both positive and negative -- are able to be contributed to help the next -- this new Administration maximize those opportunities and to avoid the pitfalls. I think that's one thing Republicans and Democrats can do on this oversight committee now rather than waiting for a couple years and then having Republicans find ways of attacking the new Administration and finding fault. It's for Democrats and Republicans to work together to point out problems, challenges, so that the new Administration can avoid them.

Let me just say that one of the things that I feel really concerned about is that a lot of our foreign aid goes in under the guise of teaching Capitalism -- teaching independence, teaching productivity, and what we end up doing then is teaching them corruption, mismanagement, and all the negative things that we point to other countries about. And many times this is the only (face ?) except for the military that parts of the world know. And the last thing we want them to think, that what America's about, is big guns and stupid government programs or inefficiency and corruption. I think that's the big challenge. You've just got to admit around the world some of them have to shake their head, and how could America be as successful -- it is -- if this is what it's all about?

So I've just got to tell you, frankly -- my perceptions -- and I do not blame USAID alone on this. My perceptions of the greatest challenges we face today in Afghanistan is not militarily. I think the front line failure in Afghanistan has been in our inability to go in and appropriately apply aid during the period of opportunity we had over the time. So I'll say this to the Bush Administration. As big a supporter I've been on certain issues, I think that the aid program in Afghanistan has been a disaster, and what I want to do is make sure -- and there's always reasons for that, believe me. I was a mayor when I was 27. I know it's easy for those who've never done anything to second guess those who are in there. Those who've never done anything have never made a mistake.

But what I need -- I really would ask you to do is point out how we could've done it better in places like Afghanistan so that the new Administration can figure out how it's -- how to avoid the problems so that our men and women who are fighting over there won't have to fight this war again, and they will actually be successful.

Because I think the success, Madam Chair, in our last two interventions is not going to be counted by the men and women who won the war. It's going to be counted by the economic and social success that we leave behind, and our aid programs are actually going to be the ones that pull that off.

And with that, I yield back, Madam Chair.

REP. WATSON: Thank you, Congressman Bilbray.

Now I'll yield -- Congressman Collier (ph), Cuellar. Excuse me.

REP. HENRY CUELLAR (D-TX): Yeah, I don't have a statement. Thank you, Madam Chair.

REP. WATSON: All right.

Congressman, do you have a statement to make? Congressman Collier (ph) -- (inaudible)?

REP.: Thank you. Thank you, Madam Chairwoman.

Last week, Secretary Clinton testified before the Committee on foreign Affairs, of which I'm a member, and I was pleased to hear that the State Department is pursuing a more comprehensive approach to diplomacy, one that will consist of something more than reaching for the holster. In the last eight years, USAID has been hollowed out. We need to restore USAID to being the premier development agency of the United States government.

An ambitious foreign aid agenda is the necessary compliment to this more thoughtful approach to diplomacy. As we learned and continue to learn from Afghanistan, it is essential to maintain a level of trust among the general population in which the United States has a national security interest. Only in the context of widespread fear and distrust of the United States can regimes such as the Taliban's emerge and consolidate power. We witness similar problems now in Pakistan where the Taliban has, unfortunately, a growing influence.

Since prior to the Soviet invasion, we have invested billions of dollars in military aid for various factions and governments in Afghanistan and Pakistan, yet those countries are now controlled or in danger of falling under the control of factions whose raison d'--tre is opposition to U.S. influence.

Clearly, our aid has not been as efficacious as it could have been. I'd suggest that our foreign aid must be closely linked to our national security objectives, but must not be perceived as entirely self interested. This necessitates investing in countries where there is not necessarily an immediate and clear national security interest. Moreover, aid should not be based on political alliances with certain parties of politicians. When we were funding Afghan revolutionaries in the 1980s, we did not anticipate that they would use their newfound skills to attack America two decades later. Our aid to Israel may be a model. Regardless of which party has been in power, the United States has provided aid to Israel and with great effect.

Within this context of de-politicizing aid on one level so that it actually reflects our national agenda, I greatly appreciate the testimony we'll hear today. James Kunder notes in his testimony that we should have a more comprehensive strategic vision (to guard ?) our distribution of aid. This kind of long-term strategic planning could help avoid reactionary programs, such as political interventions that sometimes end up being counterproductive.

Michael Walsh emphasizes the importance of maintaining USAID connections to small contractors, because these non-governmental organizations are often closest to the people we want to serve. If we're attempting to build trust with populations in areas that are important to our national security, then this is an important ingredient of success.

Again, I want to thank you, Chairwoman Watson, for holding this hearing, and I look forward to our ongoing efforts to enhance the efficacy of AID.

REP. WATSON: Thank you. If there's no additional testimony, the subcommittee will now go to the witnesses before us today. And it's the policy of the Committee on Oversight and Government Reform to swear in all witnesses before they testify. I'd like to ask all of you to please stand and raise your right hand.

Do you solemnly swear to tell the truth, the whole truth, and nothing but the truth?

MR.: I do.

REP. WATSON: Let the record reflect that the witnesses answered in the affirmative.

Now, let me begin again by welcoming and thanking our distinguished expert panelists for agreeing to be with us this morning.

First, Mr. Michael F. Walsh is the director of Programs for Finance, Grants and Contracts at Inside NGO, and an association for chief financial officers and grants and contract managers for non- governmental organizations, working in international development and humanitarian relief programs. He previously served in various roles for two decades at the Agency for International Development, and most recently worked as AID's chief acquisition officer and procurement executive.

Then Mr. James Kunder is a founding member of the Kunder Rally -- is that correct -- Associates, an Alexandria-based consulting firm focusing on international development and reconstruction issues, and is a senior resident fellow in economic policy at the German Marshall Fund of the United States.

Since 1987, he has served in multiple senior positions at AID, both domestically and abroad, and until January, 2009 was acting deputy administrator. In addition, he has published numerous articles on international humanitarian issues, peacekeeping, and crisis management.

Mr. George Ingram is executive director at the Education Policy and Data Center and Academy for Educational Development. The center works to improve education policies and programs in developing countries through better access, use, and analysis of education data and information. He also serves as president of the U.S. Global Leadership Campaign, an alliance of more than 400 companies and NGOs that promote greater resources for U.S. engagement in international affairs. Prior to his work in the private sector, Mr. Ingram was a senior staff member of the House of Representatives Committee on Foreign Affairs responsible for international, economic and development issues.

And then Dr. Thomas Maletto (ph) is the director in the International Affairs and Trade Team at GAO. In this capacity, he is primarily responsible for GAO work involving the management of development assistance by the U.S. agencies and multilateral organizations. Over the past ten years, Mr. Maletto has been focusing on a wide range of issues, including U.N. management reform, peacekeeping procurement, the efficacy of international food assistance, and combating human trafficking. Mr. Maletto holds an MA and a PHD in economics from Columbia University and a DS in industrial and labor relations from Cornell University.

I welcome all the witnesses, and we look forward to your testimony. And I would ask that each of the witnesses now give a brief summary of their testimony and try to keep this summary under five minutes if you can. Your complete written statement will be included in the hearing record.

So Mr. Walsh, we will start with you. Please proceed.

MR. WALSH: Thank you. I'd like to thank the subcommittee for taking the time to look into these important issues and the opportunity to share my perspective. This morning I'd like to speak to you about the opportunities and challenges facing USAID and the broader NGO community.

As I was leaving USAID in 2007, an estimated 50 percent of USAID Foreign Service officers were eligible for retirement. As they leave, their years of experience leave with them. Since then, approximately 50 percent of USAID officers have less than five years experience with USAID. These newly minted officers represent a new USAID, a new USAID that, one, must bridge the experience gap by bringing in more mid- level Foreign Service officers and providing entire -- the entire workforce with better training and supervision.

Two, do more than just award grants and contracts, but support the procurement system with more staff and funding to update policies and procedures and roll out worldwide systems. And three, address real operational issues, those identified by a formal committee of USAID, NGO and contractor operational professionals with congressional support to look at the actual nuts and bolts of implementing foreign assistance. Now is the time to commit to change.

Regard to my first recommendation -- USAID's staff need more technical and professional training. They've simply lost their technical edge. And beyond classroom training and web-based training, they need knowledge management systems, conferences, and other opportunities for professionals to share ideas and experiences, especially with experts in the broader sector.

Also, USAI needs the authority to hire mid-level staff to narrow the technical and experience gap. Until this can be done, USAID will continue to bundle larger awards made through limited competition. As a consequence, small and medium sized organizations have difficulty competing. The large get larger, and the others don't. The resulting concentration of the sector means fewer new ideas and approaches to address the challenges of development.

The burden of over regulation and multiple layers of audits, coupled with staff with limited experience result in a compliance- oriented, risk avoidance approach to management. We heard of a technical representative who tracked all grantee travel and field trips with a matrix to carefully assure that they performed as proposed. He didn't have time to visit the field sites to get a firsthand look at the work. We've got to get beyond auditing to the penny and support managing to the dollar, risk management rather than risk avoidance.

The contracting officers I supervise in East Africa flew into Southern Sudan and saw firsthand the challenges of working there. The terminal is often just a cluster of thorn trees, and the roads are only notional. Yet, the NGOs working there must still comply with buy American, fly American, and drive American, while documenting every penny and every partner. I expected of my COs, my contracting officers, to understand this context and manage it appropriately within the rules and regulations.

USAID's experienced procurement policy and support staff have this development perspective as well, yet they are overwhelmed. At this point there's one person responsible for all grant policies at USAID, which represents approximately $4 billion annually. Another specialist is responsible for personal services contracts, which is the important mechanism used to engage half of USAID's workforce, especially overseas.

Only four people are available to negotiate overhead, and that's probably the largest ratio of negotiators to -- (inaudible) -- agencies of any other civilian agency in the government. And just four people conduct audits around the world, okay? They need help, especially if USAID is to move forward with a new workforce and a new Foreign Assistance Act.

As you address issues in the Foreign Assistance Act, please do not neglect to increase the efficiency and effectiveness of implementation. The fly, buy, drive American requirements come from another era, but the importance of development to national security suggests that Congress should consider tradeoffs between (tight ?) aid and the effective use of the development dollar.

Further, the approvals associated with these requirements are very cumbersome, requiring, for example, every single international trip to have prior approval and the protracted waiver process to purchase laptops and right hand drive vehicles because none are made in the United States. We encourage Congress to consider establishing a formal advisory committee of USAID, NGO and contractor representatives, an Operations Issues Review Committee, to examine long-standing impediments to efficient and effective implementation. We ask for congressional support to assure that the new USAID and its contractors and grantees are not saddled with encumbrances from the old USAID. Development is simply too important to tolerate this any longer.

I spent three years as the director of OAA trying to update policies, roll out systems, and upgrade the skills of our staff with budgets that were regularly cut. It doesn't work. USAID represents so much to the world. They must be supported with adequate funding and renewed support for efficient and effective aid delivery.

I'm happy to respond to your questions, and look forward to working with you as you undertake this important endeavor. Thank you.

REP. WATSON: Thank you so much, Mr. Walsh.

And now, Mr. Kunder, you may proceed.

MR. KUNDER: Thank you, Madam Chair. I want to jettison my prepared remarks because I've had the honor of testifying many times before the House of Representatives, and I have to say that I just think the statements, the opening statements, have captured many of the issues perhaps better than I've ever heard them captured in opening statements before.

I think the lesson of USAID, the history of USAID and our country's foreign aid program, is a story of recapturing the same lessons over and over again. During the height of the Cold War we understood that if America's foreign policy was going to work, we were going to have to reach the hearts and minds of people in Africa, Asia, and Latin America. And that's why we built up something like the U.S. foreign aid program that had about 10,000 employees at that time. Then during the 1990s with the breakup of the Soviet Union, with moves towards greater government efficiency, we decided we really didn't need all these tools of foreign policy.

And we left a number of USAID Foreign Service officers -- the American technical experts that we send to Africa, Asia, and Latin America declined to just over 1,000 scattered across 85 countries of the developing world.

And now I think once again in the context of Afghanistan, the many other threats to our national security in the developing world -- we understand once again that this is a capacity that we have needed and desperately need today.

So the four points I touch on in my testimony, Madam Chair, are simply, number one, that we do need a comprehensive strategy. We do not have a consensus within the U.S. government between the Congress and the Administration, the previous one or this one, on what exactly we want to accomplish with our foreign aid program. Do we want to help our friends, or do we want to eliminate illiteracy and disease from the face of the earth?

I would respectfully submit that if the Congress ordered the U.S. Agency for International Development to eliminate illiteracy from the face of the earth in the next 20 years and said we don't care where you give the money, we don't care how much money our friends get, we just want you to eliminate illiteracy, they would eliminate illiteracy. But the problem is they're told to eliminate illiteracy and protect mountain gorilla habitat and give money to our friends and about 20 other objectives, and that's what causes confusion in our foreign aid program.

Second, we do need to rebuild the staffing. As I mentioned, we've had about an 80 percent decline in our Foreign Service officer workforce at USAID. It strikes me as very telling that our nation has recently made a decision that potential instability in Africa is critically important, and therefore, we've created U.S.-Africa Command, a new U.S. military command to treat problems of instability in Africa. And I have nothing against the U.S. military. I was proud to wear the American military uniform myself.

But it strikes me that at AFRICOM headquarters in Stuttgart, Germany we have 1,600 personnel, 1,600 American personnel, because we care about instability in Africa. USAID has 460 officers scattered across all of Africa actually working in the African countries to address instability. So somehow we've let our numbers and our toolkit get distorted over the last couple of years.

The third point I make is that -- in my testimony -- is that as a number of the members have said, we do have a proliferation of more domestic agencies getting involved in the foreign aid program.

I take a somewhat iconoclastic point of view, Madam Chair. I don't think you can put the genie back in the bottle. I don't think you can tell the United States Environmental Protection Agency don't think about Africa, don't think about Latin America, because these environmental problems are global. Same thing with Centers for Disease Control. Obviously, today the headlines are swine flu. We can't let healthcare protection stop at the national boundary. We need to pay attention to what's going on globally.

But we do need to create -- I argue -- a new set of coordination mechanisms -- I would argue under the aid administrator -- so that all cylinders are firing together, all parts of the U.S. government that have some overseas responsibilities, are coordinating their efforts.

And then the fourth point, which a number of members also touched on already, is that this question of consolidation between State and AID. I touch on the security issues. What distinguished the U.S. foreign aid program positively during much of its history was the people-to-people aspect of it, American technical experts reaching out to Africans, reaching out to Asians, reaching out to Latin Americans.

And in our current security environment what we're doing is instead of these folks out in the rice patties and out in the farmers' fields, more and more were consolidating our development experts out of security concerns in these fortress embassies around the world. And whereas before a women's group in Africa or a farmers' group could walk up to the AID office building, knock on the door and actually meet some Americans and find out we don't all have horns, now they can hardly get past the Marine, Guard detachment to actually meet any Americans.

So I think there are some real challenges in this consolidation of State and USAID that I think are undercutting our attempts to increase American influence in the developing world. And I just want to add what Mr. Walsh said. I really appreciate the committee taking an interest in this, because it is an area that most folks don't pay much attention to, but it's critically important to our nation's foreign policy.

Thank you, Madam Chair.

REP. WATSON: Thank you so much.

And now we're going to go to Dr. Maletto. You may proceed.

MR. MALETTO: Madam Chairwoman and members of the subcommittee, I am pleased to be here to discuss the challenges currently facing the U.S. Agency for International Development in establishing a strategic acquisition and assistance workforce plan.

USAID's total foreign assistance has more than doubled in fiscal year 2002 from about $5 billion to about $11billion in fiscal year 2008. Most notably, obligations overseas increased by 600 percent from about $1 billion from fiscal year 2002 to about $6 billion in fiscal year 2008. Given USAID's reliance on non-governmental organizations to implement its activities, it is vital that the agency effectively manage those activities, especially overseas.

My testimony today is based on a report we issued in September, 2008. I will focus on three topics; first, I will discuss USAID's capacity to develop and implement a strategic acquisition and assistance workforce plan. Second, I will describe the extent to which USAID can evaluate its acquisition and assistance function, and finally, I will summarize our recent recommendations, as well as the actions that USAID has taken in response.

Regarding the first issue, in September, 2008 we reported that USAID lacked the capacity to develop and implement an acquisition and assistance strategic workforce plan. We found that the agency lacked sufficiently reliable and up-to-date overseas staff level data, including information on their competencies. USAID's staff are responsible for monitoring the activities of recipients to provide reasonable assurance that the funds provided are used in accordance with applicable regulations and sound business practices.

Without sufficiently reliable and up-to-date data on its overseas staff levels and their competencies, USAID cannot identify its critical staffing needs and adjust staffing patterns to meet those needs. We witnessed this weakness during our field visits to seven USAID missions last year. At five missions we visited, the number of staff with the necessary competencies were considerably less than adequate, while at two missions they were more than adequate.

For example, mission officials in Mali said they had delayed time-sensitive seasonal agricultural projects because staff were not available when needed to approve contracts. Our survey of acquisition and assistance staff overseas supported these findings from our field work. For example, about 70 percent of respondents overseas reported that it was somewhat or very difficult to alter staffing patterns to meet the demands of changing workloads.

USAID has launched some ad hoc attempts to address weaknesses in its acquisitions and assistance workforce. However, these efforts lack critical elements of a strategic workforce plan, particularly comprehensive information on its staff overseas.

I will now turn to my second topic. USAID has not implemented an evaluation mechanism to provide adequate oversight of its acquisition and assistance function. Such oversight is essential for ensuring adherence to USAID regulations and policies, especially overseas. In fiscal year 2007, USAID developed an annual scorecard evaluation as a mechanism for assessing weaknesses in operations. The scorecard will also function as a risk-based approach to determine locations for on-site visits.

While USAID has finished piloting the scorecard evaluation, it has not implemented it. Without implementing this mechanism, USAID cannot certify the overall adequacy and effectiveness of management control for its acquisition and assistance function.

To address the concerns I just summarized, we recommended in our September, 2008 report that the administrator of USAID develop and implement a strategic and assistance workforce plan that matches resources to priority needs, such as the evaluation function. USAID agreed that it needed to put in place a strategic workforce plan that includes all of USAID's acquisition and assistance staff at overseas missions.

While USAID officials informed us that they have improved guidance to missions for preparing staffing data, they cannot ensure that all missions are accurately capturing these data, or instituting procedures to ensure that the data reported from overseas missions are reliable. In addition, USAID officials do not expect to begin collecting competency information of overseas staff until 2011 at the earliest.

Finally, USAID has increased its staff for evaluations from four in fiscal year 2008 to nine as of April 2009. However, it has not implemented the evaluation mechanism, and has completed evaluations of only two missions since the time of our report. USAID officials -- they've been -- said that they have been unable to make further advances due to other priorities.

Madam Chairman and members of the subcommittee, this concludes my prepared statement. I would be happy to answer any questions you may have.

REP. WATSON: Thank you very much.

And now, Mr. Ingram, you may proceed.

MR. INGRAM: Madam Chair and members of the subcommittee --

MS.: (Off mike.)

MR. INGRAM: Is it on now?

MS.: Yes.

MR. INGRAM: Okay, you want it closer? (Inaudible) -- I'm going to focus on the strategic aspects, the strategic infrastructure necessary to get to those management challenges and changes. And I have provided a rather detailed statement, but I'm going to follow the outline that occurs at the back of it in the last three pages, which tries to set out a picture, an overall picture of the steps that are necessary to bring a coherent, elevated development function to the U.S. government.

One is leadership. The U.S. government needs to be structured with strong leadership that has the ability to speak with a single voice on development issues, and that therefore can leverage and maximize the impact of U.S. investment and development.

Two, as Mr. Kunder said, we need a plan. We need a global development strategy that is constructed in an open, transparent fashion that articulates a coherent, realistic set of objectives and priorities for U.S. assistance and how we will accomplish them.

Three, that strategy should contribute to a Executive Branch legislative agreement on the purposes and objectives of foreign assistance that is codified in a new statute that replaces the Foreign Assistance Act and provides a clear statement of the goals and priorities and lines of authorities and accountability, and that allows the managers of our assistance programs the flexibility that is needed to respond to the opportunities in developing countries.

Four, all core development activities should be streamlined into a single organizational entity built on the best practices of all the component parts. Some functions may maintain their unique characteristics and identity, such as the MCC and PEPFAR. Others may remain independent, such as OPIC and TDA and regional foundations, but are brought into a close coordination with the core development organization.

This development function needs to be both independent and integrated with the rest of the U.S. government. It needs a degree of separation from the demands of other U.S. government policies in order to preserve the programs that address the long-term nature of development. But it also needs to be integrated to ensure that development programs are consistent and support U.S. foreign policy objectives.

The mechanisms to accomplish this duality include on the independent side USAID having strong, respected leadership that is empowered to lead the U.S. government on development issues. And USAID needs a direct reporting line to OMB. On the integrated side, USAID operates under the foreign policy guidance of the secretary of State. There is a government-wide, global development strategy to lead what all departments are doing in the development area.

USAID country missions operate as part of a U.S. government country team under the direction of an ambassador. And there would be joint staffing, including, I would suggest, that responsibility for multilateral assistance and policy towards development-related international organizations should be brought into a new USAID Office of Multilateral Development that is jointly staffed by professionals from AID, the Treasury Department and the State Department.

And finally, the agency needs to be -- needs its systems and processes and staffing rebuilt and redesigned along the lines that my colleagues have spoken of.

Thank you.

REP. WATSON: I want to thank all of the witnesses for your testimony, and we're going to now move to the question period and proceed under the five-minute rule. I'm going to begin with questioning Mr. Kunder, and then I'd like all of you to address this particular question.

Mr. Kunder, you stated in your testimony that establishment of a comprehensive set of strategic goals for the U.S. foreign aid program is management challenge number one and should be the centerpiece of any effort to rewrite foreign aid legislation in this Congress. And what elements or point do you think should be incorporated into a strategic plan for USAID, and should a new set of strategic goals be the centerpiece of any foreign aid rewrite? And then the others can chime in when he finishes.

MR. KUNDER: Thank you, ma'am. I mean, we could obviously have a three-day workshop on that question, but to give you a real quick answer --

REP. WATSON: (Just a dialogue ?).

MR. KUNDER: -- (laughs) -- I think the -- I think our nation understands that it is in our strategic interest to help our allies at one level, and that at another level to take on the global scourges that make people discouraged, distraught, and become terrorists around the world. And obviously, there are a lot of suffering people around the world who give up, who are desperate, and who are attracted by extremist ideologies.

And conceptually what we need to do is run a foreign policy that operates at both levels. We need to help our strategic friends, but we also need to take on these long-term issues that afflict mankind, which lead to hurting our nation in the long-run. The British system has recognized this explicitly, and they have both a Department of Foreign Affairs and then a Department for International Development. So they've explicitly taken both challenges on within the structure of their executive branch.

We have not done that. We don't have a Department for International Development. But I would argue that what this strategy should do is explicitly give USAID the function of taking on the long- term challenges. Take on the healthcare challenges. Take on the unemployment challenges, the desperation challenges, the lack of literacy. A place like Afghanistan -- probably more than half the population can't even read. So here we are trying to convince folks of a certain world view that supports our foreign policy that can't even read information that we distribute in the country. So you've got to take on that level of issue.

So my argument would be you create a strategic plan embedded in the Foreign Assistance Act that does take into account the priorities of the Congress and the Administration, but you give AID the task eliminating illiteracy, eliminating disease, making sure that people have access to credit around the world so they can get a decent job. And I would agree with what Mr. Bilbray said earlier. This can't all be a government function. I mean, we need to work directly with people, with private sector organizations, as well as government. And those would be -- we could go into more detail, but those would be what I would consider the core elements of a long-term strategic plan for our foreign aid program.

REP. WATSON: Mr. Walsh?

MR. WALSH: I would simply add that these strategic aspirations need to be properly resourced.

If you speak to these -- getting micro finance to the villagers and what have you -- you need to have mechanisms and a staff that can actually do that. So I just plead that you don't neglect the resourcing aspects of this strategy. Thank you.

REP. WATSON: Dr. Maletto?

MR. MALETTO: I'd like to add that USAID's management structure is sort of -- very decentralized when it comes to overseas. They really don't have a good handle of staff levels overseas, or -- actually, they can't really control very much in terms of certain staff functions overseas. So if it does something at headquarters in a strategic manner, it needs to confront the decentralized leadership it has overseas.

REP. WATSON: Mr. Ingram?

MR. INGRAM: I would just add that I think a couple of aspects of the global development strategy that are important are, one, there should be a focus on local capacity building. Almost all of our programs should focus on helping the people in-country own the programs that are being carried out and build up their own capacity.

And secondly, I think there should be an emphasis on innovation and risk taking. I would love to see a message sent from the Congress to the managers of our foreign assistance programs that we expect you to take risks. We don't expect corruption and misuse of money, but we expect you to take programmatic risk and to find those new, innovative interventions that are going to make a difference.

REP. WATSON: All right. Your testimony said that USAID's technical tools are lacking. So like geo-referencing systems, ability to teleconference, ability to call on security assets, and so forth. How can the USAID improve in this area?

MR.: The agency has a very -- in my view, a strange appropriations account structure vis-à-vis the Congress -- that is to say it has given what are called program funds, the money to actually run the healthcare programs, the education programs, and so forth -- then given a separate operating expense budget. And this has been a series of decisions over the last decades now, both by the Administration and by the Congress and under both Democratic and Republic leadership on both sides that, in my view, we've simply under resourced the organization. The operating expense budget has resulted in an 80 percent decline in staffing.

And the argument I was making, Madam Chair, is that I don't think that we need a million people running foreign aid. I think it should be a relatively small, highly trained cadre of people. But that's why I made the point that if we're going to put 1,300 people in Stuttgart, Germany just for AFRICOM headquarters, we certainly need more than 1,000 officers scattered around the entire world, because you do have to get out and talk to people.

But the particular point I was making is that if we are going to send these officers out to the field, they need world class technological systems so that they -- if they find a disease in a village, they should be able to take a blood sample, plug it into their computer, transmit the data back to headquarters, and find out what's going on. It's cost effective to magnify the impact of each of these small number of officers by giving them the technological capability that they need. And that is something that because of year after year having very constrained operating expense budgets at USAID -- there's simply -- I would agree with Mr. Walsh. They simply don't have the technological edge they once did.

These were the folks who brought the world the green revolution back in the '70s. They were at the technological cutting edge at one point. And as Mr. Ingram just said, they are no longer there. And that's what I was arguing in my testimony. We need to reinvest in these people.

REP. WATSON: Thank you. Let me just throw this out to Mr. Ingram. You're a former Capital Hill staffer with years of experience in the Foreign Affairs Committee. It's my understanding that you were the principle lead staffer on a massive rewrite of the Foreign Assistance Act over a decade ago? And what is the single most important factor or element in your opinion that needs to be included in a successful foreign assistance rewrite?

MR. INGRAM: Thank you, madam. I think it starts with getting broad ownership in rewriting the act. When we tried to rewrite the act -- and we did 20 years ago -- the House Foreign Affairs Committee, and it passed the House -- we never garnered the interest or the support of the Senate or the Administration. I would love to see this next rewrite started with a Joint Drafting Committee by the House and the Senate and the Executive Branch. And I think your committee getting interested in this, getting other committees interested in it, will broaden the ownership and involvement of members of Congress and create a critical mass that would allow you to get this through final enactment.

I think the other two quick things I would say is the congressional leaders in this need to set out a vision and principles for what they expect to be in this act -- and I use the example of the Millennium Challenge account where the President set out a clear vision, parameters on what was going to be in it, and the players, both in the Congress and in the civil society, stayed within those parameters and kept certain negative aspects out of that legislation.

REP. WATSON: Thank you so much.

I now recognize our ranking member, Mr. Bilbray, for his -- (inaudible).

REP. BILBRAY: Thank you.

Mr. Kunder, thank you very much for pointing out this issue that we need to understand the end game. I guess one of the things that those of us in the (first whirl ?) forgot -- the great struggles that we've had in the last century of eliminating child and infant mortality, or infant mortality being eliminated or reduced substantially, and we thought it was a great thing. But we did that and didn't develop the economic backbone to be able to support en economy to support the increased population. And then we are upset about how many people are starving in the third world.

And so I think outcome does matter. And any of us that grew up in neighborhoods like I grew up in know that you only want to live in a government built society if they're -- the private sector society isn't available. I think public housing is a good example. None of us wish that on somebody unless it was just a last ditch chance.

So I think we've got to remember the outcome is a strong social, economic structure to -- for the community wherever we're working. I got a question for you. We have how many agents in Africa right now?

MR. KUNDER: Four hundred and sixty American Foreign Service officers. USAID does one very excellent thing around the world, and that is if you were to go to one of our offices in Africa, we hire a lot of African --

REP. BILBRAY: (Inaudible) --

MR. KUNDER: -- technical experts, so that's -- that -- it's a feature, but I'm talking about the American -- 460 USAID Foreign Service officers across Africa.

REP. BILBRAY: Yeah, I've got Australian cousins who actually work with the American side of this thing.

What do we have in Central America right now? You have any idea what we have -- South American -- I mean, south of Mexico, north of Columbia.

MR. KUNDER: Less than that, sir. I mean, one of the unfortunate aspects --

REP. BILBRAY: Substantially -- (inaudible).

MR. KUNDER: One of the unfortunate aspects when you squeeze the staffing was that we actually diverted staff to Asia and Africa. That's where the terrorist threat was, and one of the horrible outcomes if we've stripped our staff from the Western hemisphere.

REP. BILBRAY: Madam Chair, I only bring this up because this really is an issue that we've ignored, our own backyard, and just in the last two months we've lost two governments that were very pro- United States, very pro private investment, and they've gone totally south on us because we sort of ignored our friends in our own backyard. And so I just wanted to raise that when we raise this issue, and I hope that there's an awareness that a lot of the challenges we have in the United States is directly related to Central America, and we just looked totally (past ?) -- and the Bush Administration was -- did it too. I mean, talk about Colombia, talk about Brazil, but my god, we just looked -- you know, just seems like -- totally ignore countries like Nicaragua and El Salvador and Costa Rica and Panama.

Let me go over, Mr. Walsh -- I got a question for you. When a nonprofit ends up claiming to have planted crops in -- you know, to get a grant, and they certify their grant -- in fact, let me say this 'cause young people are here. We all know in Alexandria that if somebody said I planted almonds at -- in Alexandria, you'd give the address, wouldn't you, at this location? Most young people don't know in the third world there is no address. In fact, most of the time there's no street names except for highway names.

How would you identify -- you know how we would identify in Alexandria -- how would you identify a field in Kandahar?

MR. WALSH: I understand that in places like Afghanistan and southern Sudan and many places where the NGO community is working they rely on GPS data. In fact, I believe that the Office of Foreign Disaster Assistance has routinely requested that kind of information because the refugee camps are often times moving and such. So they have tried to capture that data, although I cannot say that it's comprehensive and complete. I have to -- I can give you more detail if I get it.

REP. BILBRAY: And that obviously is the kind of new technology we not only should be using, but we have to use, because what you run into -- and Madam Chair, I'll tell you. You run into -- somebody will get a grant, get credit for it, and they'll actually have photos of somebody else's (orchard field ?), and, you know, plugged in as the documentation. And as you pointed out, this issue of -- we want to know -- was the -- (inaudible) -- to plant the trees made in America, but we -- nobody ever goes out to see if the trees were ever planted in the field at the GPS location they pointed out.

And I'm glad to hear you say that, because that is one of those great breakthroughs we've had, and around the world one of the biggest problems is you don't know how to tell somebody how to get somewhere because they don't have addresses. And great thing is now the GPS location, those five digits, two lines of five digits, are going to be our addresses in the future. And it's a great breakthrough. I'm glad to hear you say that.

The big question I've got, though, is that I really think -- and I'll say this again, Mr. Walsh, is I think that the amount of money we threw if Afghanistan in the nonprofits were not -- it was a very large amount for how much oversight we had. How can we crack down on this, especially when we point out that we have -- a good example was the -- in '08 we had USPI charged with conspiracy and fraud in connection to services rendered in Afghanistan. You know, what does the inspector general have to do to make sure that we eliminate that kind of fraud in our programs, because we talk so much about the for profit problems, but not enough -- it's almost as if somebody files and becomes a nonprofit, they're exempt from all the temptations that apply to for profit.

MR.: In fact, I would offer that the not for profit -- the nonprofit world is as sensitive about the care with which they manage not only the taxpayer's money, but the donations that they receive from private citizens. And they have a track record of preserving that and managing that as effectively as they can, because it's one thing to have a disallowance and an audit under a grant from -- with USAID, but it's another thing to have in the paper that the donations that are -- went to this organization is being used to finance the tennis court in Kandahar or something like that. That kind of publicity doesn't work for these NGOs. There are very careful about how they spend the money.

Now, having said that, we recognize that there's always going to be risk. So their challenge has been to manage risk in a highly compliance-oriented environment and also a very risk-averse environment where not only do you have the issues that I mentioned, but also auditors that are there, investigators that are more eager to look for malfeasance and such. They're very self conscious about this. Their challenge is trying to do it in the same sort of resource constraint environment as USAID. They have pressures on their overhead. They have pressures on their direct costs. And they're trying to do basically development on the cheap, as well as everybody else.

Afghanistan is a huge challenge, and I believe it would (move in ?) quickly and probably didn't -- weren't fully resourced on the operational side. So you're just going to have these kind of vulnerabilities.

REP. BILBRAY: Okay, let me just tell you from my personal observation, not just as a congressman, but as somebody who's spent some time in third world with the locals. The nonprofits tend to stick in their face even more than the government operations. And the feedback of where you've got nonprofits that are using resources in a manner that the (localcy ?) is flaunting just huge amounts of wealth. And I just found a lot of resentment for the nonprofits. And I think the problem is, is because there may be nonprofits managing here in the United States, but they're not spending enough time down looking at exactly how the money's being spent out in the third world. And people on the front line -- the citizens of these third world countries -- they see it right along. They see it when some young kid goes by in a huge yacht with a big nonprofit name across it. And they're saying, you know, my god, that could be 100 pongos (ph) used to help to feed, you know, ten villages.

So that concern of oversight is something I think that we have not focused enough on, and that's nonprofit oversight, and I hope to be able to see us -- how do -- I'd like -- and that's what I'm saying when I started -- (inaudible). I would really, really like to say how do we help this new Administration avoid those pitfalls and focus on that? Because I think that too much of us have had the problem that for profit -- we had a certain mindset, and for nonprofits, we had a separate mindset. And I think we need to put it back together and understand that potential for problems exist in both of these vehicles, and we need to make sure we got the oversight.

You've got real problems here, and we can talk about that future, about your transition, with your experience, if we can put up tag teams where you have experience and new guys going in, so there's a learning process. And the way we (faced that ?) in law enforcement -- we always made sure that we tried to put the more experienced officer with the less experienced office, so that gets transferred (through use ?).

So I yield back, Madam Chair.

REP. WATSON: Thank you. I now recognize Mr. Connolly.

REP. GERRY CONNOLLY (D-VA): Thank you, Madam Chairwoman. It seems to me in listening to the testimony we sort of have three broad problems with AID. One is what's its purpose and what's its mission in the post Cold War -- (inaudible)? The second is capacity. It's been hollowed out. And the third is sort of -- it's an orphan. To whom does it report? Is it an adjunct of the State Department? Is it a free-standing agency? And we've sort of gone back and forth over the decades as to what is the proper model.

Let me start with that third piece for a second. Secretary Rice created the Office of DFA. I last was up here 20 years ago and I worked with George Ingram and I've worked with Margaret and some others on the foreign aid bill. In fact, I think we were the last (crowd ?) to pass a foreign aid authorization bill.

I don't understand what motivated the secretary to create this office when you had an AID administrator. How did it work? What is the relationship between the AID administrator and the DFA, and should we change that as we're looking at this overhaul? Mr. Ingram? Any of you can answer but I'll start with George.

MR. INGRAM: Thank you. I think the -- I think administrations for 20 years have been coming up with -- with new programs and new initiatives and have looked at USAID and said well, it's a mishmash -- I'm not sure what it is -- I don't know if (they ?) can manage this new one -- I want a new entity to manage it, and this has gotten out of hand over the -- over recent years. And the Director of Foreign Assistance was created in the State Department as I understand it because the secretary could not obtain the knowledge she wanted on what was happening (in a democracy ?).

And so she said, we're going to bring together the information on the consolidation and what happened was it turned into not just an information center but a decision making center, and decisions (we're taking ?) from the field and from AID and put in this Washington- centric entity that was unfortunately removed from what was going on in the field. The second problem with it is it really only had jurisdiction over a large part of AID and part of the State Department but not a lot of foreign assistance that other agencies do and even parts that -- parts that the State Department does.

So absolutely the -- the effort to reform, to consolidate, to streamline needs to include the Office of the Director of Foreign Assistance and the State Department clearly needs the capacity to look at foreign assistance from a strategic point of view and from a foreign policy point of view. But it needs to as it did in the 60s and 70s, I would argue, and even 80s respect the role of the implementing organization to set the policies and to manage the programs.

REP. CONNOLLY: Others?

MR. KUNDER: Sir, I believe -- first of all, I -- I agree -- basically agree with what George said. Secretary Rice famously asked one meeting, how much money are we giving to Pakistan, and the folks from the International Narcotics and Law Enforcement Bureau raised their hand and said what they were doing and the folks from the Bureau for Democracy, Human Rights, and Labor raised their hand and said -- (inaudible) -- and AID raised it and she finally pounded her fist okay, well, who -- who has the total number, and of course the answer was nobody did. And so it was, as George said, seen as a reform where we can get all the numbers on the right page and have some clear-cut hierarchical system for allocating the resources.

I think what's happened, sir, is that two things have gotten confused here. One is a perfectly natural desire to have transparency in the budget. As George said, you can create a budget shop that -- that adds up all the numbers, makes sure they all add up, and that's gotten confused with a bureaucratic tendency on the part of the State Department, which has been at least in the last eight years buffeted by DOD, to pull AID ever closer to itself. And part of that is, in my view, a misguided efficiency move. Wouldn't it be better if we had one paper copier in Lilongwe, Malawi rather than two?

Some of it's just small bureaucratic thinking. Part of it is that -- that State has felt overwhelmed by DOD and probably the biggest thing they've got going for them to have a face, a visibility, a humanitarian implement as AID. So I think two things have gotten unfortunately confused in this whole DFA process. That's my interpretation, sir.

REP. CONNOLLY: Let me -- let me just ask a follow-up to that. One of the concerns that I've always had about that kind of consolidation within the State Department is that you're -- you're melding an operational agency or at least it once was an operational agency that actually did (thing ?) -- Mr. Bilbray pointed out, you know, in the local government we actually do things, we build things, we provide services and so forth -- whereas State Department is a policy shop. And so you now have an operational agency coming ever closer within the bosom of an agency that frankly doesn't -- isn't operational in that sense, and I just think that's a clash of cultures that doesn't work very well.

MR. KUNDER: Yeah, I think we would --

MR. INGRAM: We -- we would agree with you

MR. KUNDER: And sir, I -- I had the honor of serving in the United States Marine Corps and for (two other ?) years the United States Army. They said, wouldn't it be a lot more efficient if we just moved the Marine Corps into the Army. I felt the same way at AID -- that, you know, there are always some budgetary reasons why we can save a few dollars but unfortunately what you do is undercut our nation's toolbox -- foreign policy toolbox by -- by bringing these organizations together.

REP. CONNOLLY: Mr. Chairman, my time is up but I -- and I hope we'll have another round because I've got lots more to go into. But I certainly would hope that on our agenda and on the -- the Foreign Affairs Committee's agenda as we look at (a rewrite ?) of foreign aid with the best of intentions we've got to look at sort of the structure that we're inheriting because it doesn't seem to be very functional.

REP. BILBRAY: Thank you. I recognize myself for five minutes. In reading the GAO report and talking about the difficulties with overseeing the (A & A ?) process I note the growth from 5 billion (dollars) to $11 billion and also what I want to ask about is this. In the idea world, if you could fashion our international assistance and development efforts from scratch what model would we best follow? A model where we were supervising contractors or a model where the agency would in whatever form -- let's assuming in -- in an appropriate form itself undertook the operations or some form of both? Mr. Melito, you want to start?

MR. MELITO: I'm hesitant to say what is the best model because I don't know that there is a best model. But I do want to stress though is whatever model you choose you need to implement it fully and you need to take oversight very seriously. When we began work, AID had only four individuals responsible for overseeing all of the contracts and assistance agreements -- (inaudible) -- worldwide. At that time it was $10 billion overseen by four people.

That was their valuation function. The -- the IG at the time said that they were basically only able to (visit ?) nine missions overseas over a three-year period. So I don't think AID had any capacity to say that it was able to control its money, to know that its systems were in place, that it actually had any assurance that any particular regulations, any concerns it had over the proper use of money, was actually implemented. That's not to say there wasn't -- that money was stolen or anything, just they had no way of assuring itself.

So I would say whatever model you choose please make sure that oversight and evaluation is a part of that model, and I do think there's recent evidence that AID is taking that seriously. They've -- (inaudible) -- up that staff from four to nine. But it's -- $11 billion and 60 percent of it occurs overseas so I'm not sure what the right number is and I'm not sure exactly how they're going to do that but it's not yet the priority it needs to be.

REP. BILBRAY: Any other thoughts from the panel? Mr. Walsh?

MR. WALSH: Yes. I'd like to offer that -- that one of the challenges the U.S. government has in general is sustaining a technical edge because it's -- it's heavily -- it's very expensive to invest in the training and to take people offline (considering their work ?) -- what worked for us. So the best model would be in terms of achieving or utilizing technical excellence is to rely on the commercial or the private sector and then you hopefully and the expectation is that the government would have the ability to define the requirement and monitor accomplishment. But, you know, the -- the technical excellence is usually in the private sector and it's a little bit more efficient to -- to -- to sustain that.

REP. BILBRAY: Mr. Ingram?

MR. INGRAM: Yeah. I would just say that -- that you answered the question yourself when you said both at the end, and AID needs a larger number of better trained and skilled staff who have the technical capacity and experience to design programs, to manage and oversee programs that are carried out in the field by nonprofit and for profit organizations that have more detailed specific expertise. But they also need to understand is that expertise by AID staffers -- they spend a lot of time engaging with their counterparts in developing countries in ministries and other institutions, and that is part of the development process and that AID staff needs to be sufficiently knowledgeable that they can transfer information to those senior officials that they're dealing with. So they play both -- design the projects and oversee them but also providing advice.

REP. BILBRAY: Mr. Kunder?

MR. KUNDER: Sir, I -- I thank you for asking that question. This is what I spent a good bit of my time wrestling with the last seven years. My view is that clearly there's got to be some balance between making use of the enormous capacity in the American private sector -- universities, private businesses, and so forth. And on the other hand, we need enough people internally, as Dr. Melito is saying, to oversee this because if you don't know what you're talking about then the private sector is going to snooker you sometimes.

And so I think the pendulum has swung a bit too far on the side of not having enough oversight within the government and that's why Dr. Melito is talking about these pathetically small numbers -- four versus nine. I mean, come on. We've got to get serious about this. We're managing billions of dollars of the taxpayers' money.

We hire -- we have a locust plague reliably every 17 years Africa. We do not need to have world class entomologists on staff waiting for 17 years. We need -- when we need them we should hire them from the private sector. But certainly we need people on staff who -- who can oversee the technical specialists that we hire and right now the pendulum has swung way too far. We don't have enough bodies to oversee the taxpayers' dollars.

REP. BILBRAY: Thank you. I yield back both my time and the gavel.

REP. WATSON: The ranking member and I were just discussing how best to manage because it's management, I think, that is really important and I really feel that the nonprofits -- the people on the ground that have been there in the villages and so on -- let's take Africa, for instance -- can relate better to the circumstances. But in some places they might be too young and in some places they might be too irrelevant. I do know that in more traditional societies you really have to go to the chief. (At my station it was the man marquee ?) -- someone who could really interpret.

Can I hear some comment about that? I don't think one pattern fits the global environment if we're going to restructure. I think we have to go region by region. I'd like to get some response from any of you that would like to speak to that. How do we manage these programs? How do we supervise them and who should?

MR. WALSH: I would offer that -- that there is -- first, there are so many different approaches among the NGOs (that to ?) their intervention and how they relate to the -- the villagers -- the villages and what have you. There are some that -- that have numerous expats, for example, operating from the country level down and then they have a presence in the village and others where they don't. They have purely local nationals managing the country office. Then they just have (headquarters ?) staffing them.

I -- I think everybody who works in -- in -- who's worked in development and has been out to those villages realizes we hope and appreciate that one of the skills that you have to bring is the ability to relate effectively with the villagers and the beneficiaries. So every organization that is engaged in these sort of activities is operating a little bit differently or structured a little bit differently but I hope that they would have that standard of -- of effective engagement with the beneficiaries. I -- if there's exceptions to that I don't have an explanation.

REP. WATSON: Dr. Melito?

MR. MELITO: The model that AID uses is the Harvard model of using a number of individuals hired in the countries that are providing the services as well as a cadre of international or (using Americans as staff ?) and it -- and it works very well in certain cases. In some instances, it doesn't work well at all. Part of our other work is looking at food assistance and we were struck when we visited Kenya a couple years ago that the projects that we were visiting -- (inaudible) -- no American AID official had visited there in several years, and it turns out that there had only been nine monitors for food assistance for a $2 billion budget worldwide.

So there were concerns with timeliness. We had also shown in cases where food had not -- basically had rotted. And so there was -- definitely concerns we were raising and part of what we were finding was part of it was there was not good information flow from the field back to headquarters on how to address these things. So there needs to be a right balance between having permanent staff who can monitor as well as people hired in the field who actually have good working knowledge.

REP. WATSON: Mr. Ingram?

MR. INGRAM: If you -- there's a whole section in my statement where I talk about the importance of analysis. And it's not just having different operating mechanisms by region. It's by whether or not you're working at the community level or the national level. It depends on whether or not you're in a middle income country or you're in Sudan or Somalia. And so what you have to do is before you get involved in an activity you've got to be very careful in analyzing the dynamics in that community, in that country, in that situation, and then bring in your interventions.

Gear your interventions according to is the decision maker the chief -- is the decision maker the church in that entity -- do you need to bring community organizers in there just to bring the community together to begin with to see what their -- their interests are. So you've got to have multiple mechanisms but it starts with good analysis.

REP. WATSON: I'm going to yield to the ranking member, Mr. Bilbray.

REP. BILBRAY: To follow up on that, Mr. Ingram, a good example is we send somebody in in NGO fields -- okay, we're in Afghanistan so we'll go into Kabul and hire somebody to be our liaison. You send somebody from -- from Kabul into Kandahar and to talk to a Pashtun and not go to the chief, the chief now sees that the agent that we're using is a competitor to his -- his authority and creates a whole new, you know, dynamic that creates a lot of problems.

And we've seen this happen again and again is that we take our first world mentality and try to fight there. You know, I was telling the chair -- chairwoman one of the first things you do in a Polynesian or Micronesian island is go and meet with the chief of the island so you get permission, and even when you go to places like the San Blas Islands in Panama you always go to the elder. We bypass that to a large degree because we've gone to Kandahar and think that, you know, an Afghani is an Afghani is an Afghani. How do we avoid this in the future and have you, you know -- and I'm open to comments on that. If you think this is a wrong observation, I would -- I would encourage you to, you know, state it.

MR. INGRAM: I would say that in my statement I emphasize the need to improve technical capacity of USAID. I also should have said we need to improve the cultural knowledge and -- and the regional knowledge of the staff and the language capability. And I think a mistake we have made both when we went into Iraq and when we went into Afghanistan is we didn't listen to some of our old (hands ?) who had been around those parts of the world for 20 and 30 years and really knew the culture and knew the political dynamics, and we need to spend more resources and more time planning on some of that cultural and political analysis.

REP. BILBRAY: Mr. Walsh, how much of this could have been the State Department and the military's concept in Afghanistan of wanting to reinforce the authority of a central government because there had been such lack of central authority in Afghanistan? How much of this could have been a direct conscious effort at strengthening the new government rather than trying to work with the traditional structure?

MR. WALSH: I simply don't know that -- the circumstances. But I would offer that -- that most of the people who work with these NGOs are country directors that have been there in programs oftentimes, you know, five, 10, 15 years. So I have no explanation as to why there is a disconnect -- a cultural disconnect. But more often than not, the NGOs have been there before AID showed up and before there was an intervention and they should have some cultural sophistication but there's no guarantees on that. But I -- I don't know to what extent the politics of that was driven -- (inaudible).

MR. KUNDER: Mr. -- Mr. Bilbray, I would argue -- I mean, to defend my AID colleagues a little bit I think they -- they fully well understand that an Afghan is not an Afghan is not an Afghan. The -- the problem in my view, respectfully, has been one of resources.

Twenty years ago, AID sent somebody up country in Laos. They spoke Lao.

They probably had been trained in all the kinds of things you are correctly pointing out in terms of cultural awareness and anthropological mapping and all that. The reality is as the -- with the breakup of the Soviet Union AID was sent into a lot more countries in Central Asia. We went into more countries, as Dr. Melito pointed out, handed more dollars to program in more program areas, environment and so forth, while the whole time the staff was shrinking by 80 percent.

And with all due respect, I -- the kind of assignments we made (is ?) we had a warm body we sent them to Anbar Province or Ghazani (ph) or -- and then we didn't have the time to give them the language training. So to me the question you're raising -- it's a very profound question -- is directly related to the resourcing issue. USAID needs more staff because then they'll have time to do the language training and the cultural training, the cultural awareness training, because you're pointing out a critical point.

But you give them 1,100 officers around 85 countries and -- and you know what the demand right now is. We need more people in the PRTs in Afghanistan. We need more AID officers to advise our military officers. Well, do I have time to send them to Pashtun training? Of course not. I mean, it's not me anymore but the guys who are in there now. But anyway, that -- I see this as directly related to the resources, sir.

REP. WATSON: Mr. Hodes, do you have additional questions, then Mr. Connolly? Mr. Hodes?

REP. HODES: Thank you, Madame Chair. I want to talk a little bit about problem of coherence and vision. Throughout the testimony of the panel, it is clear to me at any rate that not only do we need a coherent national security strategy but one in which development assistance and our smart power is integrated as a essential part of an overall national security strategy. Within the realm of our assistance and aid it strikes me that we need to establish priorities and come up with a vision, a coordinating vision that will guide our efforts.

One of the things that I note is the spread of our development efforts across the governmental agencies -- 53 percent USAID and the rest spread through multiple agencies. So somebody in a foreign country who wants to deal with a development issue may go to the Agriculture Department for one thing, may go to the Department of Energy for another, may come to USAID people for another.

How do we get a handle on this in the intervening time starting now between where we are and ultimately where we want to get to with a rewrite of the bill and all that? What do we do now in order to get a handle on this and start coordinating our development efforts amongst all these government -- governmental agencies, or is that an impossible idea? Mr. Kunder, do you want to start?

MR. KUNDER: Sir, it's a very critical question and I would point out that the answer to it lies in part in what Mr. Ingram said is that U.S. foreign policy and U.S. foreign aid are coordinated partially in Washington and they are coordinated partially at our embassies around the world. So you have to address it, I would argue, at both ends. I have argued -- and I touched on this in my statement -- that we need to create a new set of coordination mechanisms.

That's why I mentioned I didn't think the genie could be put back in the bottle. You can't tell the Energy Department in our globalized world, you have nothing to do with the international arena -- you have to stay here. Of course, they're going to be involved. EPA is going to be involved. CDC is going to be involved.

So my view is that you would create under the AID administrator a new administration development coordination council where each of the assistant secretaries from the relevant domestic departments would attend. There would be some shared information we'd establish across the country, across the government -- strategic goals. Then at the country level you would have -- again, under the AID -- AID mission director in that country you would write a country strategic plan.

What are the United States of America's development objectives in this country? Is it family planning? Is it education? Is it health care? Then all of the government agencies present in that country would be working together towards that set of goals. So my view is that both in Washington and the field we need to create, and I would say this should be put into the rewrite of the foreign assistance act, is some new set of coordination mechanisms that simply don't exist now.

We -- when -- when this -- when the foreign assistance act was written we didn't have this kind of globalization of the domestic departments. And so we didn't -- we didn't perceive the need for these kinds of mechanisms. Today, we desperately need such new coordination mechanisms.

REP. HODES: Any other thoughts from the panel? Mr. Ingram?

MR. INGRAM: Yeah. Let me just use your question to make a point because Jim answered your question nicely, and that is -- and I think you recognized it in the way you posed the question -- is coordination is an important useful second best solution, and you first consolidate as much as you can so that like programs are brought together under common management and then you don't have the coherence problems. And those programs that aren't core to USAID or the development function or you decide should remain independent, they get coordinated. But if you consolidate as much as possible that makes rational sense then you have less of a coordination problem.

REP. HODES: Taking off from what you've said, is there an adequate -- do we know adequately what all the programs are? I mean, is there a central repository of this knowledge that says here are all the programs that need to be either coordinated or managed and consolidated and/or coordinated? Do we know what all the programs are, Mr. Melito?

MR. MELITO: I would suggest that we do not know. I would say, though, we have an ongoing study on U.S. efforts to fight global hunger and we have thus far identified 10 different U.S. agencies which have that as one of their missions. We have a lot of work ahead to see exactly how they overlap, how they differ, how they coordinate. But that was a surprising number for us, that there are 10 agencies.

REP. HODES: So it strikes me that the first question is let's get a handle in terms of -- let's just get a handle on what all the programs are and which agencies are doing what. That seems to be job number one. My question about a coordinating council is that in order first to deal with the consolidation issue I don't -- I'm not sure that a coordinating council is the body that could deal with the consolidation issue.

So it strikes me that there needs to be some responsibility perhaps, and -- and tell me if I'm wrong -- maybe in the State Department, maybe somewhere else -- but some responsibility at a top level to order the review and consolidation of various programs across agencies and then deal with the coordination as the second step. Am I -- am I on track with that?

MR. INGRAM: And I would say that you've got to raise it to the highest levels of government. That mandate has to come from the Congress and the president.

REP. HODES: Okay. Thanks. I yield back.

REP. WATSON: Mr. Connolly?

REP. CONNOLLY: Thank you, Madame Chairwoman. Well, and if I could add my two cents, I think we need to be loud and clear that the lead development agency of the United States government is AID. It's not the EPA. It's not CDC. It's not the Department of Labor, though they may all have pieces of it.

The lead agency has to be AID or its successor, but otherwise we're floundering around and we -- and we lack the coherence my colleague, Mr. Hodes, just referred to. I -- I want to go back to mission for a minute. I know Mr. Ingram and his colleagues are involved and are trying to rewrite the foreign assistance act to make it more coherent.

And I was intrigued, Mr. Kunder, with your suggestion that maybe what we need to do is focus on a -- on a task. Let's end malaria. Let's end -- let's end illiteracy.

And that has a certain attraction to it. But let me ask this.

Certainly, Congress is as guilty as anybody over the -- since the forming of foreign assistance as we know it in (encrusting ?) the foreign assistance act with multiple purposes -- biodiversity, I can remember I was part of that one myself -- and all of the noble causes, and I don't know how you resist that. But does it make sense to have a more streamlined agency that is focused on a handful of things and only those things or do we need to preserve the flexibility to understand that in the real world AID and/or its successor agency is going to serve a multiplicity of purposes?

MR. KUNDER: Sir, I've -- I've suggested that if we were a business we'd have gone out of business a long time ago because we try to stay in every business sector known to mankind -- 50 or 60 different kinds of programs around the world, literally mountain gorilla habitat, and you can't do that. So I think my view is that you have to -- you have to operate in the real world as you -- as you correctly point out. My view is that -- that such a strategy would have to have three elements.

First, you would have to define some of the broad strategic objectives like the Millennium Development Goals, like ending illiteracy -- some very broad strategic objectives. Second, you would have to supplement that with some sort of opportunities fund because things are going to pop up that nobody can foresee and there are going to be political pressures to contribute to some multilateral effort to take on a new disease.

So -- so you can't hamstring the whole problem. You need some sort of supplementary opportunities fund. And third, you need to refresh the system every couple of years. I've testified that the -- on these -- that I would respectfully recommend that if the Congress is going to rewrite the foreign assistance act they build into it something like the Department of Defense's quadrennial defense review because you can't say now and forever the answer is illiteracy or now and forever the answer is malaria.

But what the Defense Department does is -- is manage an interagency quadrennial review of what are the current strategic threats, and then we reorient our defense programs to those strategic threats. At least we achieve a consensus every four years and I think such a flexible model might be applicable to the foreign aid arena as well.

MR. INGRAM: Representative Connolly, as you pointed out I think the Congress is part of the problem, and I don't know how to get around that part of the problem because most of those congressional interests in specific -- (inaudible) -- as you say are quite legitimate and important. You also have a problem on the ground in that every country has different interests. But what does come to the fore for me is when you look at the history of foreign assistance and you look at where the successes are, the successes are where the USAID, where the U.S. government, where the international community has tackled a particular problem for 10 years -- the green revolution or rehydration, polio.

And it's important -- and -- and that leads you to the direction of let's choose a few priorities and focus our resources on those. But development is much more complicated and much more complex than tackling a (few clear ?) problems. And I guess if I had my druthers I would like to see a foreign assistance program that tackles five global problems and 70 or 80 percent of our assistance is devoted to tackling those in public-private partnerships for 10 years, and then the other 30 percent, whatever percent you choose, goes to deal with a lot of these other more complicated human aspects of development.

REP. CONNOLLY: Two -- two points about that. The way -- the problem is with the best of intentions the way bureaucracies work, if you don't write it into the law we don't do it, and so you -- because we -- we generally don't act flexibly. And so, you know, if you -- if you list these are the 10 things we're going to do, by God if an eleventh comes up that isn't one of the 10 we're not going to do it even if we should be. And so I think that's, you know, potentially a problem with that approach. But it may be worth it. Let me -- let me ask --

MR. INGRAM: Can I -- can I respond to that?

REP. CONNOLLY: Certainly.

MR. INGRAM: As you -- as you note -- will note the foreign assistance act is 700 pages and I would suggest to you that most of what's in the foreign assistance act is not followed by the bureaucracy.

REP. CONNOLLY: Well --

MR. INGRAM: In fact, it is so complicated and so complex the -- people in the bureaucracy seldom pick it up, and when you come to rewriting the foreign assistance act keep it short and sweet and put in there what you really care about and what you really care about -- keeping, holding, making the bureaucracy accountable.

REP. CONNOLLY: Yes, although I would -- I know you know this, having helped write the foreign aid bill. The problem with foreign aid is it's an (orphan ?) up here and so one of the reasons it's so barnacle encrusted is because you're trying to pull together a coalition of support and if, you know -- (inaudible) -- the rest of these important to this member of Congress we'll put it in if we can get his or her vote.

Final point -- question, Madame Chairman, if I may -- you talked about trying to -- you characterize AID as a risk-averse culture, and George, I heard -- Mr. Ingram, I heard you talk about the need to -- for Congress to show some flexibility and actually encouraging risk. And I think there are a lot of reasons perhaps why we've evolved into a risk-averse culture. But let me ask you, Dr. Melito, aren't you part of the problem?

My own experience when I did this -- I wrote the foreign assistance bill on the other side of the aisle of the House. Often, we'd get audit reports from GAO or from the IG that were very thoughtful and really helped illuminate problems. But sometimes we got some that, frankly, took no cognizance of how difficult this work is -- no cognizance for the fact that you're in a work environment that may be engaged in a civil war or huge natural disasters or just adverse conditions that boggled the mind and they're doing the best they can, and the fact they didn't produce eight widgets, they only produced seven, is not quite the thing you might think it is. Training auditors and IGs to actually understand this working environment I think is a challenge and I just wondered if you'd comment on it.

MR. MELITO: GAO places balance and fairness at a -- at a -- as a very high priority of ours, and I -- I (stress ?) with my staff and -- (inaudible) -- we go in country and part of why you go in country is not just to -- to see what's going on but actually to really appreciate more how difficult this is, and I think we do a very good job of that. Part of also what we're trying to do though is to maximize the effectiveness of these programs, help maximize it, and also get the most for the taxpayers' money. It's a very difficult balance that we're trying to achieve. I think, though, we have a very productive and very positive working relationship at AID.

MR. KUNDER: Could I say -- say -- could I say something very briefly, sir? I -- I agree with George, though, that the message does have to come from the Congress. I have no problem with the work that GAO does -- never did. But the message -- if you're an AID officer and you're sent off to Afghanistan what you're hearing -- you're seeing what's going on. First of all, the -- the size of our own internal inspector general staff has increased every year. Then on top of that, the Congress has created both a special inspector general for Iraq, now a special inspector general for Afghanistan.

You're just being told by the Congress. Our people are highly intelligent. You're being told be cautious. I mean, and there's nothing wrong with being cautious, and if I -- I want to say something because I really believe this deeply -- that considering the environments AID officers work in, I know there are occasional scandals because I dealt with every one of them the last seven years.

But by and large, we are giving the taxpayer a level of oversight in these kind of difficult environments that is comparable to what we're getting in the city of Alexandria where somebody just stole $170,000 from the parking meters. I mean, you can't catch everything. But -- but the -- the problem is the message is clearly one of don't take any chances and you can't succeed in Afghanistan without taking some chances.

REP. WATSON: It appears that that might (be a vote ?) and we're checking on it. I think that the ranking member has one final word and then I'm going to throw out -- (off mike) -- okay. All right. I'll go to the ranking member.

REP. BILBRAY: Thank you. I -- Mr. Ingram, there's two different kind of consolidations we need to talk about. Nineteen forty-eight, there was a concept that all aviation should be controlled by the Air Force -- that Navy, Marine Corps didn't need it anymore and -- because airplanes are airplanes. But the tasks for those airplanes were different. And that is why to this day we have close support within those ground base operation, the Naval operations (aren't ?) consolidated.

And so we -- we get into that -- (inaudible). We (even ?) hit it now with the unmanned vehicle. The Air Force doesn't like them but the guys on the ground love them. Let me -- let me sort of throw out to you the concept of using the outcome. Rather than literacy in a country that doesn't read the Koran because it's -- because they can't translate it into their native tongue, you know, a task that I think that we ought to be looking at in Afghanistan is the elimination of the opium economy and a replacement -- the return to the orchards of the 1950s, 1960s that the opium economy destroyed, because let's face it, you don't worry about your orchards if you don't think they're going to be alive in the next couple, you know, months.

But that would include the use of biological herbicides and the appropriate way of using those herbicides (at the ?) destruction of the opium crop over a period of years rather than total destruction, you know, to where people start realizing that the Americans are killing their crops. And I'm saying -- and let me talk to you about this. Let's just say that the armed forces went in and wiped out the opium crop the way that some people are purporting while our AID -- (inaudible) -- is there.

The children of Afghanistan is learning that Americans in their country are destroying Daddy's crop rather than seeing that the Americans in Afghanistan are helping Dad plant the new orchard that -- that are going to feed them in the future. You see how this isn't as simple as we (might have ?) because the task I think -- if we are tasked with this transformation the military application and some of the non-AID activities have to be totally coordinated with that -- with that aspect, and I -- I point that out.

I think that's the kind of goal, not looking at literacy in itself in isolation but the outcome of a new economy. Do you think that the coordination could be brought under a thing like the director for foreign assistance working with the Department of Defense and that kind of coordinated activity? Or do you think that we -- we need to leave some of this out of a coordinated effort like the director of foreign assistance which you were pointing out? Is that the person you were picturing as being the czar or are you talking about creating a new czar for this oversight?

MR. INGRAM: No, I wasn't thinking of creating a czar. I was thinking about putting as much of the development functions of the U.S. government in, let's say, USAID, and that with the global development strategy that cuts across the whole U.S. government and probably gets led by the NSC, AID, and the State Department -- they lead the formulation of that. But it includes the military in there and EPA and CDC and what not in formulating a broad global development strategy.

And then when it comes to a country like Afghanistan and it's really under the direction of the ambassador that has to -- and his appropriate senior folks in Washington who have to drive what the U.S. foreign policy interest is in that country, and if it's the elimination of opium then you need to put together a U.S. government wide strategy, part of which might be the military, a large part of which might be helping with the economic and social evolution and dynamic which would come under the rubric of USAID. But not all of that might fall under the expertise of USAID.

You might have to get EPA involved in there. If there was a health component you might have to get CDC. So it's not that you fold everything into USAID. It's that USAID is the government agency that has the expertise and knowledge for how you carry out development programs in a country -- social, economic, political development -- and it then reaches out to the rest of the U.S. government and pulls it in as their expertise and experience is needed.

REP. BILBRAY: Madame Chair, I appreciate this hearing and I guess the challenge to the successors of Mr. Walsh, I really think -- you know, I spent 18 years in local government and I've learned one thing -- the way to bridge the huge gap between the theory of how you think things are going to work and how they're actually going to work is to actually implement them on task orientation so you learn that there's little things like support aircraft are needed by the Marine Corps.

I think the two challenges we have was one in Afghanistan and the other is Central America of how do we use our aid to replace the drug economy and the lack of economy in certain parts of the world and be able to transition in and learn by doing and keep that flexibility because the outcome is what matters, not -- not the structure or the process. And I think that we need to be able to modify that process and the only way to know if it's working or not is -- (inaudible) -- are you moving towards the outcome, and I think our problems right now in Afghanistan and in Latin America are reflective of the fact that we need to get more to the outcome base rather than just following a procedural. And right now your (argument ?) is so compartmentalized there's no way to follow the ball because it bounces in too many different locations. Thank you very much, Madame.

REP. WATSON: Okay. Thank you so much. Our time is really winding down. We have a ceremony in Emancipation Hall that many members want to attend. So let us do this. We're going to have to have a subsequent hearing. I am going to have the staff send you a memo because I'd like to hear more about what we do in high-threat environments -- how do we have programs, what kind of programs.

I'd like to know how do we work in the Peace Corps with these programs and so on. But we're going to -- yeah. We're going to put in writing a memo to you. You can respond and we'll include those in the record. We will have a follow-up hearing because I think we're just getting into the meat of the restructuring and there's a tremendous need for a restructuring, reorganizing, bringing -- so that we don't duplicate so many of these efforts that we're trying to make.

If we are going towards peace -- if we're moving into that era how do we do it? And so we will specifically ask you the questions and you can write back. We'll make them a part of the record. Then we'll follow up and have a final hearing. And with that, the meeting is adjourned. Thank you so much for your testimony.

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