Foreign Aid Reform: Issues for Congress and Policy Options

Foreign Aid Reform: Issues for Congress and
Policy Options
Updated July 17, 2008
Susan B. Epstein and Connie Veillette
Specialists in Foreign Assistance
Foreign Affairs, Defense, and Trade Division

Foreign Aid Reform: Issues for Congress
and Policy Options
Since the terrorist attacks of September 11, 2001, the role of foreign assistance
as a tool of foreign policy has come into sharper focus. The President elevated global
development as a third pillar of national security, with defense and diplomacy, as
articulated in the U.S. National Security Strategy of 2002, and reiterated in 2006. At
the same time that foreign aid is being recognized as playing an important role in
U.S. foreign policy, it has also come under closer scrutiny by Congress, largely in
response to a number of presidential initiatives, and by critics who argue that the U.S.
foreign aid infrastructure is cumbersome and fragmented, and that aid policy is
In recent years, several initiatives have heightened congressional interest in, and
caused a re-examination of, U.S. foreign assistance policy and programs, including
organizational structure. In January 2006, Secretary of State Rice announced an
initiative to bring coordination and coherence to U.S. aid programs. The Secretary
created a new State Department position — Director of Foreign Assistance (DFA)
— the occupant of which serves concurrently as Administrator of the U.S. Agency
for International Development (USAID). A new Bureau of Foreign Assistance (F)
was created to coordinate assistance programs, led by the DFA, who in 2006,
developed a Strategic Framework for Foreign Assistance to align U.S. aid programs
with strategic objectives. The Framework guided the writing of the FY2008 and
FY2009 budgets.
U.S. foreign aid programs began in earnest with the Marshall Plan to rebuild
Europe following World War II. Arguably, the underlying rationale for aid during
most of the post-war period was to counter Communist influence in the world. Since
the fall of the Berlin Wall and the collapse of the Soviet Union, and particularly since
the terrorist attacks of September 11, 2001, aid programs have increasingly been
justified within the context of anti-terrorism. Despite changing global conditions and
challenges, U.S. foreign aid programs, their organizational structure, and their
statutory underpinnings, reflect the Cold War environment in which they originated.
These factors are, arguably, motivating the heightened interest in re-evaluating
how U.S. aid programs function, and in revamping how they are administered. There
is also a growing recognition of the role that foreign assistance can play as a foreign
policy tool that is equal to the role of diplomacy and defense within the current
international environment characterized by regional conflicts, terrorist threats,
weapons proliferation, concerns with disease pandemics, and the difficulty in
overcoming poverty. As a result, a number of recent high-profile studies have made
recommendations for specific reforms.
This report, written by Connie Veillette, a former CRS Specialist, will be
updated by Susan Epstein to reflect continuing developments.

Overview ........................................................1
Criticisms of Current Foreign Aid Structures and Programs.............1
Current Aid Platforms and Funding................................3
Aid Platforms.............................................3
Current Funding...........................................4
Statutory Basis of Foreign Assistance..........................5
Historical Rationales for Foreign Assistance.........................6
Trends in Foreign Assistance Funding..............................7
Historic Trends............................................7
New Presidential Initiatives..................................8
Regional Distribution of Aid.................................9
Sector Distribution of Aid..................................10
Use of Supplementals.....................................11
Issues for Congress...............................................12
Revisiting the “Why” of Foreign Aid.............................13
Recent Foreign Aid Reform.....................................14
Proposed Levels of Foreign Assistance............................15
0.7% of GNI.............................................16
Increase by 1% of Budget..................................16
Maintain Current Aid Levels................................17
Policy Options...................................................19
Reform Options..................................................19
Refocus Assistance...........................................19
Change/Define Role of Defense Department........................20
Change Use of Multilateral Organizations..........................21
Create a Unified Budget........................................23
Unified Function 150 Budget or Budget Presentation.............23
Unified National Security Budget............................23
Restructuring Options.............................................24
Elevate USAID to Cabinet-Level Department.......................24
Merge USAID into State Department.............................24
Create Aid Agency with Increased Jurisdiction......................25
Improve Interagency Coordination...............................26
Create a Coordinating Entity................................28
Elevate Aid Agency Within NSC Structure.....................29
Maintain Status Quo With or Without Minor Modifications.......30
Re-write the Foreign Assistance Act..............................30
Major Reform Report Recommendations..............................31
HELP Commission...........................................31
Policy ..................................................32
Structure ................................................32
Budget .................................................33
Senate Foreign Relations Committee..............................33

Structure ................................................34
Budget .................................................35
Center for Strategic and International Studies (CSIS).................35
Policy ..................................................35
Structure ................................................35
Budget .................................................36
Appendix. Acronyms..............................................37
List of Figures
Figure 1. U.S. Official Development Assistance as a Percentage of National
Income ......................................................8
Figure 2. Regional Distribution of Foreign Aid, FY1995, FY2001, and
FY2008 ....................................................10
Figure 3. Supplemental Funding for Foreign Operations..................12
Figure 4. Proposals for Increased Aid.................................18
Figure 5. Share of Multilateral Assistance, FY1981-FY2008...............22
Figure 6. Distribution of ODA by Agency, CY2006 (Percentage of Net
ODA, Bilateral and Multilateral Assistance)........................28
List of Tables
Table 1. Foreign Operations Appropriations, FY1999-FY2009..............5

Foreign Aid Reform: Issues for Congress
and Policy Options
Congress and the Administration have increased their interest in foreign
assistance programs in the post-9/11 environment, prompting a re-examination of the
purposes of assistance, and how best to achieve those objectives. The renewed
interest occurs as the Administration has initiated many new programs that
introduced performance-based assistance in the form of the Millennium Challenge
Account, and sector-specific assistance, largely directed at health programs in Africa.
The Administration also unveiled in early 2006 a restructuring of foreign aid
programs administered by the Department of State and the U.S. Agency for
International Development (USAID). The restructuring is meant to link aid programs
with strategic objectives and to provide more coordination and coherence. In
addition, a number of recent studies have made specific recommendations for both
policy and organizational reforms.
Congress has been considering these reforms as part of the annual
appropriations process. Congress may consider more far-reaching reforms in
authorizing legislation in the coming years in the context of a new Administration.
Criticisms of Current Foreign Aid Structures and Programs
The current structure of U.S. foreign aid entities and the conduct and
effectiveness of aid programs have come under increasing scrutiny on a number of
fronts. Programs have been described as fragmented and cumbersome, and lacking
in flexibility, responsiveness, and transparency. Aid policy is considered lacking in
focus and coherence. There is ambiguity with regard to who develops aid policy, not
just between the State Department and USAID, but among the 26 other government
departments, agencies, and offices that provide some type of foreign aid.
In general, some disillusionment with foreign aid results from a perceived lack
of progress in some countries that have been aid recipients for decades. Other
criticism results from an outdated aid apparatus developed during the Cold War that
has been reformed in a piecemeal fashion, often adding conflicting and competing
priorities, and that has not been updated to reflect current world conditions and

Definitions and Data Sources
Definitions. There is no precise definition of what the term foreign assistance
encompasses. At its broadest level, it can refer to any and all expenditures that
provide assistance to foreign countries in the areas of economic development,
humanitarian assistance, disaster response, security and military assistance,
governance and rule of law, health, and trade development. The broad definition
covers programs managed by many government agencies in addition to those of the
State Department and USAID.
Often, when talking about appropriations, the term is considered to refer to those
programs funded in annual State Department and Foreign Operations appropriations
bills. This would include programs managed by the State Department, USAID, and
several independent agencies, but would exclude some major funding streams, such as
from the Department of Defense and the Department of Health and Human Services.
A narrower conceptualization of the term refers to programs that promote long-term
economic development, poverty alleviation, health, and humanitarian assistance,
largely but not entirely, managed by USAID. (Humanitarian assistance is understood
to encompass food aid and disaster assistance.) When used as such, the term excludes
large sums of assistance administered by the State Department, but would include
grants from the Millennium Challenge Corporation.
Another term, official development assistance (ODA), is also used. ODA is defined
by the Organization for Economic Cooperation and Development (OECD) as grant
assistance of a mainly development nature. As such, it excludes some security and
military assistance.
For the most part, this report adopts the broadest definition. This approach is used
because possible reforms that Congress may consider could address aid programs
government-wide. In some parts of this report, the foreign operations budget is
considered separately, and is noted as such in the narrative.
Data Sources. This report relies on two main data sources, both of which have
limitations. The first data source is budget documents submitted to Congress, and
enacted foreign operations appropriations. While this source provides detailed
information on a large portion of U.S. aid programs, it does not cover aid programs of
domestic agencies. Those agencies often do not systematically report these types of
expenditures in their congressional budget justifications, and their appropriations bills
do not always provide the details of the funding approved.
The second source is a data base maintained by the Development Assistance
Committee (DAC) of the OECD. Donor nations report their calendar year
disbursements of official development assistance to the DAC, and the DAC report is
the internationally accepted measure of ODA contributions of the international
community of donors. Its limitations, as noted above, is that it is not inclusive of all
the assistance that the United States provides. On the other hand, it is a reliable
source of data on what types of assistance are being provided by all government

Specific points of contention include:
!the level of U.S. assistance, usually in relation to other international
donors, and the composition of aid, generally the ratio of
humanitarian and development aid to security assistance, by region;
!the coordination of aid among programs in USAID, the State
Department, and independent agencies, such as the Millennium
Challenge Corporation, the Trade and Development Agency, the
Overseas Private Investment Corporation, and several regionally
focused funds, such as the Inter-American Foundation, and the
African Development Foundation;
!the coordination of aid among numerous domestic agencies, such as
the Department of Health and Human Services (HHS) and the
Center for Disease Control (CDC), that administer some type of
foreign assistance program;
!the coordination of bilateral and multilateral assistance;
!the coordination of aid with other international donors;
!the involvement of the Department of Defense in aid programs that
some observers believe should be carried out by civilian agencies;
!the perceived ambiguity with regard to who sets foreign aid policy
among the State Department and USAID;
!the effectiveness of aid programs, especially in light of a steady
diminution of technical expertise at USAID, and the increasing
reliance on contractors both in Washington and in the field to carry
out aid programs; and
!the lack of a foreign assistance strategy to guide and justify the
provision of aid generally, and one that deals with programs,
specifically, that responds simultaneously to recipient country needs
and U.S. priorities.
Some of these issues are longstanding; others are responses to more recent changes,
such as new aid initiatives, new offices administering assistance, and a general
increase in the foreign aid budget.
Current Aid Platforms and Funding
Aid Platforms. The State Department and USAID are the lead agencies that
provide foreign assistance. Both are funded in the annual State Department and
Foreign Operations appropriations bills. In FY2007, the State Department controlled
about 64% of bilateral and multilateral assistance, while USAID accounted for
approximately 20%. The remainder is managed by other independent agencies such
as the Millennium Challenge Corporation, the Trade and Development Agency, and

the Peace Corps. Some funds are co-managed by the State Department and USAID,
such as the Economic Support Fund, although major policy decisions are often
retained by State. Some observers maintain that restructuring initiatives beginning
in 2006 have further removed USAID from policy decisions.
The accounts managed by USAID largely pertain to long-term development,
health programs, and disaster relief, although the Office of the Global AIDS
Coordinator, which administers the largest U.S. initiative on human
immunodeficiency virus and acquired immunodeficiency syndrome (HIV/AIDS), is
located in the State Department. The State Department aid portfolio, in addition to
HIV/AIDS funds, comprises accounts related to military assistance (implemented by
the Department of Defense), narcotics and law enforcement, migration and refugees,
anti-terrorism, peacekeeping operations, and accounts focusing on democratic
transitions in states of the former Soviet Union, and eastern Europe and the Baltics.
Prior to 2006 reforms (see section below on recent reforms), there was little
coordination at the budget and policy development level between State and USAID.
There are, however, a number of independent agencies administering foreign
assistance that remain outside of State and USAID, and that are also funded in the
annual foreign operations appropriations bills. These include the Millennium
Challenge Corporation, the Trade and Development Agency, the Peace Corps, the
Overseas Private Investment Corporation, and the Export-Import Bank. These
agencies develop their own budgets, and critics argue that their activities are not well
coordinated with those of State and USAID.
In addition to these entities, there are aid programs administered by
approximately 14 different departments and agencies. The largest portfolio belongs
to the Department of Defense, which manages programs providing humanitarian
assistance, civic action activities, training and equipping of foreign militaries, and
even some health-related assistance. (See page 27 for a complete list of agencies
reporting assistance in calendar year 2006.) These organizations have provided as
much as 40% in official development assistance in recent years. Each of these
agencies develops its own budget and those funds are appropriated in domestic
funding bills. These programs remain outside of the jurisdiction of foreign
operations appropriations subcommittees and foreign affairs authorizing committees
that have oversight of foreign assistance. In addition, there is no central reporting
mechanism for these programs, making it difficult to ascertain the full amount that
the United States is providing in foreign assistance in any given year. Proponents of
aid reform point to this situation as one of the main symptoms of a fragmented aid
structure that impedes coherent, government-wide foreign assistance policy and
Current Funding. Since the events of 9/11, amounts requested and approved
by Congress for foreign assistance generally have trended upward. The foreign
operations FY2009 budget request is $26.1 billion, or an increase of 8.8% over the
$24 billion estimate (including supplements only within P.L. 110-161) in foreign
assistance programs for FY2008. The actual FY2007 funding level for FY2007,
including supplemental funds, totals $26.4 billion. The estimated level for FY2008,
approved in the FY2008 Consolidated Appropriations Act, Division J (H.R. 2764,
P.L. 110-161), represents 1.2% of the total U.S. budget.

Part of the trend in increases is due to the greater use of supplemental
appropriations measures to fund international affairs spending, including foreign
assistance. Table 1 provides funding levels for foreign operations since FY1999 in
both current and constant dollars, and includes both regular and supplemental funds.
(It is difficult to ascertain with much precision the appropriated levels for programs
located in domestic agencies’ budgets. See Figure 6 for an indication of these
funding channels.)
Table 1. Foreign Operations Appropriations, FY1999-FY2009
(discretionary budget authority in billions of current and constant dollars)
FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Current $15.4416.4116.3116.5423.6739.0523.4523.1326.3827.2228.78
2009 $20.0820.8020.2020.1128.0344.9326.0324.8327.7127.8428.78
Notes: Amounts do not include mandatory Foreign Service retirement accounts that total
$34.6 million in FY2009. FY1999 excludes $17.61 billion for the IMF. All figures include
regular and supplemental appropriations. Figures for FY2009 are requested amounts.
Figures for FY2008 are State Department estimates. Both FY2008 and FY2009 figures
include supplementals passed by Congress June 30, 2008, P.L. 110-252.
Statutory Basis of Foreign Assistance. The main statutory basis of
foreign aid programs is the Foreign Assistance Authorization Act of 1961 (FAA), as
amended (P.L. 87-195; 22 U.S.C. 2151). The FAA has been amended numerous
times since its initial enactment, but it has not been comprehensively reauthorized
since 1985. Instead, Congress has enacted a series of statutes to authorize specific
aid programs. These include the FREEDOM Support Act (P.L. 102-511); the
Support for East European Democracy (SEED) Act (P.L. 109-102); the Afghanistan
Freedom Support Act of 2002 (107-327); the U.S. Leadership Against HIV/AIDS,
Tuberculosis, and Malaria Act of 2003 (P.L. 108-25); the Millennium Challenge Act
of 2003 (P.L. 108-199), and various Security Assistance Acts since 1999.1
Over the years, most aid reform studies have recommended that the FAA and
related statutes be replaced with new legislation that would update the statutory basis
to eliminate the emphasis on the Cold War and communism and reflect current
international conditions, thereby bringing coherence to numerous aid programs.

1 This list does not include all statutes authorizing foreign assistance, but is illustrative of
some of the more recent legislation. See Legislation on Foreign Relations Through 2005,
Volumes I-A and I-B, House Committee on International Relations, and Senate Committee
on Foreign Relations, January and April 2006.

Historical Rationales for Foreign Assistance2
Since the start of U.S. foreign aid programs, the rationale for such assistance has
been posited in terms of national security, humanitarianism, and commercial interest.
From a beginning in rebuilding Europe after World War II and assisting newly
independent states in Africa, aid programs reflected Cold War tensions that continued
through the 1980s. U.S. assistance programs were viewed in a national security
context, as a way to prevent the incursion of Soviet influence in Latin America,
Southeast Asia, and Africa.
In the immediate aftermath of the dissolution of the Soviet Union, aid programs
lost their Cold War underpinnings. With the end of the Cold War, foreign aid
programs reflected less of a strategic focus on a global scale, and instead responded
to regional issues such as Middle East peace initiatives, supporting the transition to
democracy of eastern Europe and republics of the former Soviet Union, addressing
international drug production and trafficking in the Andes, and stemming illegal
immigration. Foreign aid lost its anti-Communism rationale, and decreasing foreign
aid budgets in the 1990s reflected the lack of an overarching theme.
Even during periods when aid programs were justified in the context of the Cold
War, and more recently in the context of anti-terrorism, foreign aid programs also
were justified for commercial and humanitarian reasons. Foreign assistance has long
been defended as a way to either promote U.S. exports by creating new customers for
U.S. products, or by improving the global economic environment in which U.S.
companies compete. At the same time, a strong current has existed that explained
U.S. assistance as a moral imperative to help poverty-stricken countries and those
trying to overcome disasters or conflict. Providing assistance for humanitarian
reasons or in response to natural disasters has generally been the least contested
within the American public and policymakers alike.
The purposes of aid are thought to fit within these rationales. By promoting
economic growth and reducing poverty, improving governance, addressing
population growth, expanding access to basic education and health care, protecting
the environment, promoting stability in conflictive regions, protecting human rights,
curbing weapons proliferation, and addressing drug production and trafficking, the
United States would achieve its goals of promoting national security, ensuring a
global economic environment for American products, and demonstrating the
humanitarian nature of the U.S. people. Some observers have returned to the view
that poverty and lack of opportunity are the underlying causes of political instability
and the rise of terrorist organizations, much as poverty was viewed as encouraging

2 This very brief historical review of foreign assistance necessarily omits much of the nuance
and detail of a 60-year program. For more information, see Foreign Aid: Diplomacy,
Development, Domestic Politics, by Carol Lancaster; U.S. Development Aid — An Historic
First, by Samuel Hale Butterfield; and CRS Report 88-285F Development Assistance
Policy: A Historical Overview, by Theodor W. Galdi, April 6, 1988; CRS Report 88-283F
An Overview of U.S. Foreign Aid Programs, by Stanley J. Heginbotham and Larry Q.
Nowels, March 30, 1988; and CRS Report 86-86F Foreign Aid: The Evolution of U.S.
Programs, by Stanley J. Heginbotham.

a breeding ground for communist insurgencies in the 1960s, 1970s, and 1980s. At
the same time, the rise of disease pandemics that have the ability to spread with
increasing speed has also brought focus to U.S. aid programs.
The present national security rationale for foreign affairs programs has
transitioned from a largely anti-communist orientation for some 40 years following
World War II to a more recent focus on anti-terrorism in the post September 11,
2001, environment. In 2002, President Bush released his National Security Strategy
that for the first time established global development as the third pillar of U.S.
national security, along with defense and diplomacy. Development was again
underscored in the Administration’s re-statement of the National Security Strategy
released on March 16, 2006.3
The Bush Administration has also announced significant initiatives relating to
diplomacy and foreign aid. A new transformational diplomacy initiative, announced
in 2006, would reposition diplomats to global trouble spots, create regional public
diplomacy centers, localize small posts outside of foreign capitals, and better train
diplomats in language, public diplomacy, and democracy-promotion skills. Also
announced in 2006 was the creation of a new position at the State Department, the
Director of Foreign Assistance (DFA), who serves concurrently as USAID
Administrator. Heading up the new “F bureau” at State, the DFA has created a new
Strategic Framework for Foreign Assistance with the objectives of providing more
coordination, coherence, transparency, and accountability for aid programs. New
presidential initiatives, including the Millennium Challenge Account (MCA), the
President’s Emergency Plan for AIDS Relief (PEPFAR), and the President’s Malaria
Initiative (PMI) have resulted in large increases in the foreign aid budget. Pledges
for increased aid, to Africa, for example, as well as reconstruction costs in
Afghanistan and Iraq, are also driving the recent increases.
Trends in Foreign Assistance Funding
Historic Trends. Spending for U.S. foreign assistance programs, that began
in earnest in the 1940s with a four-year $13 billion (current dollar)4 investment in
rebuilding Europe under the Marshall Plan, has fluctuated in response to world
events. After the Marshall Plan ended in the early 1950s, U.S. assistance focused on
Southeast Asia to counter Soviet and Chinese influence. Under President Kennedy,
aid levels rose to their highest historic levels (as measured as a percentage of national
income) since the Marshall Plan, with the Alliance for Progress in Latin America,
and assistance to newly independent states in Africa. Aid spending leveled off in the
1970s, even with spending for Middle East peace initiatives, and then rose again in
the 1980s to address famine in Africa, continuing peace efforts in the Middle East,
and the U.S. response to insurgencies in Central America. The 1990s saw aid levels
fall to their lowest levels, averaging approximately 0.14% of national income.

3 Executive Office of the President, U.S. National Security Strategy 2002 and 2006,
available at [].
4 Adjusting for inflation, $13 billion in 1946 dollars would amount to approximately $137
billion in 2007 dollars.

Figure 1. U.S. Official Development Assistance as a Percentage of
National Income

0.40f GN
0.30t o
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005
1960 to 2006
Source: Data provided by the U.S. Agency for International Development as reported to the
OECD Development Assistance Committee (DAC).
Notes: Official Development Assistance (ODA) is reported as calendar year disbursements
and covers government-wide aid programs. It does not include some military assistance
accounts, such as FMF and IMET.
New Presidential Initiatives. U.S. aid programs have recently focused on
a number of initiatives relating to health funding and assistance to Africa.
Proponents of these new initiatives believe that aid programs need to be responsive
to current global conditions, such as disease outbreaks and regional instability, while
critics argue that these new focuses are diverting resources from some regions, are
neglecting other needs, such as infrastructure, or long-term development and poverty
alleviation, and are further contributing to the fragmentation and stovepiping of aid
Beginning in 2003, the Administration launched new initiatives with sector or
region specific focus.
!HIV/AIDS. Under a new five-year initiative in 2003, the
President’s Emergency Plan for AIDS Relief (PEPFAR), President
Bush pledged a total of $15 billion by FY2008 for HIV/AIDS
prevention and treatment. Africa, with 12 of the 15 PEPFAR focus
countries, is the primary beneficiary. With the FY2008 budget
request, this pledge would be exceeded. On May 30, 2007, the
President announced a follow-on plan to provide a total of $30
billion through FY2013.
!Malaria. The Administration announced a President’s Malaria
Initiative (PMI) in 2006, pledging that the United States would
spend an additional $1.2 billion over a five-year period (FY2006-

FY2010) on malaria prevention and treatment. Congress
appropriated $122 million in FY2006 and $248 million in FY2007.
The request for FY2008 is $388 million, keeping the pledge on
!Africa. Prior to the 2005 G-8 Summit, the Administration
announced that it would double U.S. assistance to Africa by 2010.
The FY2008 request keeps the doubling pledge on track. Excluding
Millennium Challenge Corporation (MCC) assistance, bilateral aid
to the region would increase by 53%, largely driven by HIV/AIDS
!MCC. In announcing the creation of the independent Millennium
Challenge Corporation, the President initiated a new aid platform to
reward recipient countries for sound economic and governance
policies, and pledged $5 billion in annual funding by FY2006. In
fact, requests have never topped $3 billion a year, which is also the
amount of the FY2008 request. Congress has consistently cut the
MCC request, with some Members expressing concern that the
program was slow to get started, and has not disbursed much of its
existing funding. Funds are appropriated for three- or five-year
compacts, although grants are obligated on an annual basis.
!Education in Africa. Announced in 2002, the Africa Education
Initiative pledged to spend more than $600 million on basic
education over five years. Funding is to train new and existing
teachers, provide textbooks and other teaching materials, and offer
tuition scholarships.
Regional Distribution of Aid. The distribution of foreign assistance by
region has varied depending on world events. Since the Administration announced
the President’s Emergency Plan for AIDS Relief (PEPFAR), the regional distribution
has been skewed in favor of Africa, where 12 of the plan’s 15 focus countries are
located. Since 2001, aid to Africa has more than quadrupled, from $1.3 billion to
$5.5 billion in FY2008.5 In the same period, aid to South and Central Asia has
increased ten-fold, from $205 million in FY2001 to nearly $2.2 billion proposed for
FY2008. Assistance to Europe and Eurasia has fallen by 60% as a result of some
countries graduating from SEED and FSA programs. Decreases in the Near East
reflect reductions in aid to Israel. Figure 2 shows the percentage share of bilateral
aid in three selected years.
A major focus of the FY2008 budget is a continuation of funding to address the
HIV/AIDS pandemic in many countries with high prevalence rates. The 15 PEPFAR
focus countries are the main beneficiaries, although Child Survival and Health (CSH)

5 Even while HIV/AIDS funding has increased, other programs have been cut in the FY2006
to FY2008 period, including those supporting basic education, agriculture productivity,
water supply and sanitation, and family planning and reproductive health.

funds are used in non-focus countries as well.6 A concern of some aid analysts is the
effect that this focus has on other types of development assistance and in other
regions. The largest effect can be seen in Africa. If Global HIV/AIDS Initiative
(GHAI) funds are excluded, then Africa would see a 27% increase in funding since
FY2001, rather than a quadrupling.
Figure 2. Regional Distribution of Foreign Aid,
FY1995, FY2001, and FY2008

50.0%ral A
f FY95
30.0%re oFY01
20.0%e S
Source: U.S. Department of State and CRS calculations.
Notes: Data is drawn from aid accounts funded in annual foreign operations appropriations
bills. Figures exclude food aid. Includes GHAI funds. AFR = Africa; EAP = East Asia and
Pacific; EUR = Europe and Eurasia; NE = Near East; SCA = South and Central Asia; WH
= Western Hemisphere.
Sector Distribution of Aid. From a historical view, U.S. aid programs have
emphasized different approaches. With the Marshall plan, aid planners sought to
rebuild infrastructure in European societies that had previously attained healthy
development levels. With a growing number of communist insurgencies and political
instability in Asia, Latin America, and Africa, the focus turned in the 1960s to rapidly
improving economic growth by addressing urban poverty. This approach segued in
the 1970s to issues of rural poverty with programs that attempted to provide
integrated assistance in such sectors as agriculture, education, and health. At the
same time, under President Carter, human rights considerations entered into foreign
aid policy. In the Clinton Administration, sustainable development became popular,
and aid programs also encompassed issues of human rights and democracy, as the
United States helped eastern and central European nations transition to democracy.
6 For more information, see CRS Report RL33485 U.S. International HIV/AIDS,
Tuberculosis, and Malaria Spending: FY2004-FY2008, by Tiaji Salaam-Blyther.

Many observers describe current U.S. programs as giving priority to health and
security assistance. This perception is largely driven by the large increase of funding
for HIV/AIDS prevention and treatment, and the costs of reconstruction in
Afghanistan and Iraq. Health funding, including all USAID and State Department
programs, comprised approximately 6% of the foreign aid budget in FY1995, but has
risen to nearly 30% in FY2008. Security assistance,7 on the other hand, has increased
slightly from 36% in FY1995 to 44% in FY2008.8
Use of Supplementals. Supplemental appropriations for Foreign Operations
programs, which in FY2004 exceeded regular Foreign Operations funding, have
become a significant channel of funds for U.S. international activities, especially
those related to reconstruction efforts in Iraq and Afghanistan. Supplemental
appropriations bills have often also been used as vehicles to provide additional
funding to respond to unanticipated emergencies or natural disasters.
There has been some criticism that the Administration has relied too heavily on
supplementals and that some items, particularly relating to Iraq, should be
incorporated into the regular appropriations cycle. The Administration counters that
given the nature of rapidly changing overseas events and unforeseen emergencies, it
is necessary to make supplemental requests for unexpected and non-recurring
expenses. Funds in supplemental appropriations bills are generally declared
emergency, and do not fall under discretionary budget caps.
Figure 3 shows the growing reliance on Foreign Operations supplemental
appropriations. Congress approved a FY2007 supplemental bill (H.R. 2206/P.L. 110-
28) providing $6.146 billion in international affairs spending, of which $4.42 billion
is foreign aid. For FY2008, the Administration submitted an emergency request with
the regular budget that totaled $3.3 billion for international affairs spending, of which
$1.37 billion is proposed for foreign aid programs. A second request was sent to
Congress on October 22, 2007 for an additional $1.96 billion in foreign assistance,
for a total of $3.328 billion in supplemental FY2008 funding. In June 2008,
Congress passed FY2008 and FY2009 supplemental funding in H.R. 2642/P.L. 110-
252, which provides an additional $4.16 billion in foreign operations funding for
FY2008 and $2.87 billion for FY2009.

7 Security assistance is the total of Economic Support Funds (ESF), Foreign Military
Financing (FMF), International Military Education and Training (IMET), Peacekeeping
Operations (PKO), International Narcotics Control and Law Enforcement (INCLE), and
Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR) accounts.
Some observers would not include all of ESF in this category since significant amounts are
used for development purposes.
8 It is difficult to track sector allocations over time for a number of reasons. Some aid can
be attributed to several sectors (water sanitation can be considered relating to health,
agricultural productivity, and the environment, for example), but may not have been
consistently reported as such from year to year. Also, USAID has changed the structure of
its Congressional Budget Justification as a result of the Strategic Framework so that not all
information is reported in the same format as in previous years. Finally, funds for some
activities can be spread over various accounts. For example, health activities are funded
from CSH, FSA, SEED, and GHAI.

Figure 3. Supplemental Funding for Foreign Operations

35 Do


25nt USupp
15 Cu
199 199 200 200 200 200 200 200 200 200 200
Source: CRS calculations based on enacted appropriations measures.
Notes: All figures include regular and supplemental appropriations. Figures are in current
U.S. dollars.
Issues for Congress
Congress will likely play an integral role in any type of foreign aid reform, by
authorizing a new aid infrastructure, appropriating funds for refocused aid programs,
or both. The challenges facing Congress include weighing the justifications for
foreign aid programs in relation to benefits to the United States that may be provided
by such assistance, and to a variety of domestic needs that often put budgetary
pressure on foreign aid. This entails scrutiny of the current level of assistance and
proposals to increase aid.
A foreign aid reform effort likely necessitates a review of the current
organization of the numerous departments and agencies that provide international
assistance programs with an eye toward providing coordination. This may involve
a re-evaluation of the existing statutory framework provided by the Foreign
Assistance Act of 1961, as amended (P.L. 87-195; 22 U.S.C. 2151, et seq.), and other
authorizing legislation, depending on the extent of the reform.
There are a variety of organizational reforms that can be undertaken. Those
chosen would depend on what Congress perceives to be the major problems besetting
U.S. foreign assistance policy, whether those problems are related to goals and
strategy; implementation and effectiveness; or coordination and coherence. The
following section outlines the criticisms of current aid programs and issues that
Congress faces in reforming them. The next section provides a review of proposals
for policy options and organizational reform in how foreign aid policy is formulated
and how aid programs are administered and managed.

Revisiting the “Why” of Foreign Aid
Many analysts contend that the rationale of foreign aid has centered on security
concerns for most of its existence, with security most often defined in an anti-
communism or anti-terrorism context. Another rationale — to reflect the
humanitarian nature of the American people — has also been prominent. A third
rationale — to promote U.S. exports — has been prominent at some points. Further,
some aid proponents have justified aid as a means to reduce illegal immigration to
the United States by addressing the economic motivations for migration, or to reduce
the illegal flow of narcotics. Others have cited the need for the United States to
exercise leadership in the aid field commensurate with its economic, political, and
military standing in the world. It is likely that U.S. foreign aid policy will continue
to be predicated on all of these rationales.
There are a number of other considerations, however, that policy makers may
address in any redesign of U.S. foreign aid.
!Should U.S. assistance be based on the political and economic
performance of recipients (i.e., tied aid)? There is a strong belief in
the development community that countries with democratic
institutions have greater capacity to absorb and benefit from foreign
aid. Critics argue that a focus on performance-based criteria
neglects countries in dire need of assistance, but that are not able, for
one reason or another, to achieve U.S.-determined benchmarks.
!Should U.S. assistance emphasize poverty alleviation without regard
for the nature of the recipient country government? Critics of aid
point out that U.S. aid has been given to countries with repressive
regimes, and may signal tacit support for such regimes. The poverty
of its citizens cannot be overcome by foreign assistance, if repressive
and corrupt regimes exploit the provision of aid. On the other hand,
some observers believe that there is a moral obligation to find the
means to help people in need, most of whom are the victims of
repressive regimes.
!Should U.S. assistance be focused on countries that have the best
chance of graduating from aid? Such a focus would reduce the
number of countries in which the United States conducts
development activities, as “best cases” are identified, and as
countries graduate from assistance. On the other hand, it would omit
countries that have not reached a level of development that
approaches sustainability.
!Should development serve as its own distinct purpose, or should it
be seen as a tool of diplomacy? Those who favor a strong
development policy based on a humanitarian rationale believe that
development is distinct from diplomacy and should not be subsumed
by it. Others believe that the American public will not support
foreign aid budgets unless it can be demonstrated that aid serves
strategic U.S. foreign policy objectives.

Recent Foreign Aid Reform
The latest reform effort, begun in January 2006, is the Secretary of State’s
reorganization creating a new position and new bureau to coordinate aid. The
changes were made in the context of achieving the Administration’s development
initiatives. To that end, she created a new State Department position, Director of
Foreign Assistance (DFA), and a new Bureau of Foreign Assistance (F). The DFA
serves concurrently as Administrator of USAID. When established, it was argued
that the dual-hatted nature of the position, along with a rank equivalent to Deputy
Secretary, would allow for the better coordination of aid programs.
The DFA has authority over assistance programs managed by the State
Department and USAID, and provides guidance for foreign assistance delivered
through other government agencies. While the FY2008 foreign operations budget
request was written under his direction, the DFA has had very little input, except
informally, over the aid provided by other agencies and departments, that according
to one USAID document now totals more than 50 government entities.9 This
situation was, arguably, not unexpected since the DFA has no statutory authority,
except that delegated to the office from the Secretary of State.
In 2006, the DFA presented a new Strategic Framework for Foreign Assistance10
that links aid programs to U.S. strategic objectives. Countries are grouped into five
categories representing common development challenges. Rebuilding countries are
those in, or emerging from, internal or external conflicts. Transforming countries
include low and lower-middle income countries that meet certain performance
criteria based on good governance and sound economic policies. Developing
countries are those low and lower-middle income countries that are not yet meeting
performance criteria. Sustaining Partnership countries include upper-middle income
countries with which the United States maintains economic, trade, and security
relationships beyond foreign aid. Restrictive countries include authoritarian regimes
with significant freedom and human rights issues, most of which are ineligible to
receive U.S. assistance except for humanitarian purposes. Programs in these
countries operate through non-governmental organizations or through entities outside
the country. A sixth category was created to encompass global or regional programs
that transcend any one country’s borders. Countries are expected to graduate from
one category to another, and then eventually from aid entirely.
Each category represents common development challenges around which aid
programs are to be designed, and linked to strategic objectives. Those objectives
include peace and security; governing justly and democratically; investing in people;
economic growth; and humanitarian assistance. Countries in each category may
receive assistance under several or all objectives.
The initial reception to the Framework and the DFA position within the
development community is mixed. Some observers hail the effort as a timely and

9 See “USAID-US Government Coordination,” at [
coordination/us_gov_ coordination.html].
10 The Strategic Framework is available at [].

necessary attempt to provide some coherence to a growing number of assistance
programs. These analysts see the effort as a good first step to address a fragmented
assistance structure. They also argue, however, that the reform does not go far
enough in addressing the weakened state of technical expertise at USAID in the
context of decreasing operating budgets. USAID staff numbers have been cut in half
since the early 1980s as most development activities are carried out by private
contractors and the non-governmental organization community, with many observers
remarking that instead of development experts, the agency now has contract
Others criticize the new Framework for being inadequate. They contend that
unless the DFA has authority over all U.S. assistance programs, the serious problem
of lack of coordination and coherence will not be solved. If one examines the
sources of official development assistance, as reported to the Organization for
Economic Cooperation and Development (OECD), programs under the jurisdiction
of the DFA — that is all State Department and USAID programs — accounted for
58% of U.S. aid in calendar year 2006. The actual amount may be much less as it
appears that the Office of the Global HIV/AIDS Coordinator, which administers the
PEPFAR program, is not a part of the F bureau.
Proposed Levels of Foreign Assistance
A number of international forums have highlighted the needs of the developing
world and the role of rich countries. Annual events, such as the G-8 summits and
international meetings on the subject of development, have produced pledges to
increase aid in overall terms, for specific regions, and for particular purposes.11 The
proliferation of pledges raises the question of what is an appropriate level of
assistance that will bring about sustainable development while being cognizant of the
capabilities, both political and financial, of donor countries.
Some international aid goals are wide-ranging and ambitious, such as the U.N.’s
Millennium Development Goals (MDG), while others are more focused, such as
doubling aid to Africa by 2010. The U.N. Millennium Project established eight
development goals to be achieved, some partially, by 2015.12 The U.N. Development
Program (UNDP) estimates that global aid levels from all donors would need to
climb to $195 billion by 2015 in order to reach these goals. With aid levels in 2004

11 Such summits include the Millennium Summit in 2000; the Monterrey Conference on
Financing for Development in 2002; and the Gleneagles Summit in 2005. The 2000 Summit
adopted the U.N. Millennium Development Goals. The Monterrey Conference produced
pledges to increase overall levels of aid, either by a monetary figure, or as a percentage of
national income. Countries attending the Gleneagles Summit promised to double aid to
Africa by 2010. A 2001 summit on HIV/AIDS and other infectious diseases provided the
impetus for HIV/AIDS-related U.S. commitments.
12 The eight goals include to eradicate extreme poverty and hunger; achieve universal
primary education; promote gender equality and empower women; reduce mortality in
children under five years old; improve maternal health; combat HIV/AIDS, malaria, and
other poverty related diseases; ensure environmental sustainability; and build a global
partnership for development between industrialized and developing countries.

at $79 billion, this would mean more than doubling assistance in roughly a 10-year
period. While this goal would necessitate an increase from the current level of 0.25%
of donor countries’ income to about 0.54% by 2015,13 the United Nations has had a
longstanding goal of donor countries providing 0.7% of national income. As of
2006, only five countries had reached that goal (Denmark, Luxembourg, the
Netherlands, Norway, and Sweden).
The number of pledges made by the United States and other donor countries is
cause for a consideration of the burden that each should shoulder. There are two
ways to measure levels of foreign aid — as a percentage of a country’s Gross
National Income (GNI), or as a percentage of a country’s budget.14 Advocates of
increasing foreign aid have called for the United States to reach specific goals with
regard to both. Critics believe that neither quantifiable measurement is appropriate
and that large increases in assistance are not necessary. Figure 4 represents the
current level of foreign aid spending proposed for FY2008 compared to a one percent
increase, and an increase to 0.7% of national income.

0.7% of GNI. A popular target for donor country assistance is 0.7% of GNI.

This target has developed over time as a lobbying tool for increasing foreign
assistance, and some countries have committed to working toward the goal by 2015.
The United States has never committed to the 0.7% target. U.S. aid levels were
0.17% in 2006, or approximately $23.5 billion.15 In 2005, U.S. aid reached $27.9
billion, or 0.22% of GNI, reflecting high levels of debt relief and aid disbursements
in Iraq and Afghanistan. The European Union vowed to reach a collective level of

0.56% of national income by 2010, and to hit the 0.7% target by 2015. Historically,

U.S. foreign aid as a percentage of national income has been higher than present
levels. During the 1960s, the annual average was 0.51%, falling to 0.26% in the

1970s, 0.22 % in the 1980s, and 0.14% in the 1990s.

The value of the 0.7% target, or any percentage target, as the correct level of aid
that will produce measurable development results has never been firmly established.16
Based on GNI of roughly $14 trillion projected for 2008, a U.S. foreign aid budget
that is 0.7% of GNI would total $98 billion, representing more than a tripling of aid
levels from the $27.6 billion disbursed in 2005.
Increase by 1% of Budget. Another measurement is the ratio of assistance
to the overall annual budget. At $24.3 billion proposed in FY2008, current U.S.

13 Owen Barder, “Are The Planned Increases in Aid Too Much of a Good Thing,” Working
Paper Number 90, Center for Global Development, July 2006.
14 See CRS Report RS22032, Foreign Aid: Understanding Data Used to Compare Donors,
by Larry Nowels.
15 The highest level of U.S. aid since 1960 was 0.60% that occurred in 1963 with the
Alliance for Progress program in Latin America.
16 Some studies, notably one from the Center for Global Development, calls into question
the value of the 0.7% target and note the flawed process in which it originated. Michael A.
Clemens and Todd J. Moss, “Ghost of 0.7%: Origins and Relevance of the International Aid
Target,” Working Paper Number 68, Center for Global Development, September 2005.

foreign aid comprises 1.2% of the budget.17 This level is a decrease from previous
levels that averaged 1.4% during the 1990s and 1.8% during the 1980s.18 Some
advocates of higher levels of aid have proposed increasing foreign aid spending by
an additional one percent of total budget authority, or to approximately 2.2%. Since

1980, U.S. aid levels have reached 2.2% in just five years: 1980, 1981, 1984, 1985,

and 1993. In terms of the FY2008 budget, a one percent increase would amount to
an additional $29 billion for a total foreign aid budget of $53 billion. This would
represent a near doubling of assistance.
Critics of both proposals counter that foreign aid is measured in such a way that
it excludes some U.S. government and private sector activities. Official development
assistance (ODA)19 consists of aid activities of a development nature. While this
includes some Department of Defense assistance, such as DOD’s HIV/AIDS
assistance to some foreign militaries, humanitarian assistance, and counter-narcotics
programs, it excludes the State Department’s Foreign Military Financing (FMF) and
International Military Education and Training (IMET), as well as costs of U.S.
military activities that proponents argue promote stability around the world. Funding
for FMF and IMET programs alone has totaled roughly $4.6 billion in each of the last
three fiscal years.
Other critics point out that ODA data also exclude private giving. The State
Department estimates that these charitable contributions from organizations totaled
$8.6 billion in calendar year 2005, and that if one includes private capital flows
totaling $69.2 billion, the ratio of total revenue flows to GNI would come to 0.84%.
The Hudson Institute’s Index of Global Philanthropy 2007 estimates that
contributions from individuals and organizations amounted to $33.5 billion in 2005,
not including another $61.7 billion in remittances (cash transfers by immigrants to
individuals in their countries of origin). If both are included, they say, U.S. aid levels
would reach 0.98% of GNI. Some observers do not believe private assistance,
whether from charitable contributions or corporations should be counted since both
can fluctuate from year to year, and in the case of corporate investments, occur in
more advanced economies, such as China and India. Further, there is disagreement
within the development community on the effects of remittances in recipient
Maintain Current Aid Levels. Regardless of the debate on what should be
included in ODA figures, some observers do not believe that U.S. aid should be

17 This calculation is based on the function 150 International Affairs section of the U.S.
budget and excludes some international affairs spending by domestic agencies that is
included in ODA figures reported to the DAC (see footnote below).
18 Data are drawn from Historical Tables, Budget of the U.S. Government, Fiscal Year 2008,
Table 5.3 Percentage Distribution of Budget Authority By Agency, 1976-2012, page 105.
19 The most commonly accepted reporting framework is provided by the Organization for
Economic Cooperation and Development (OECD). Its Development Assistance Committee
(DAC) compiles calendar year disbursements of official development assistance data from
donor countries and publishes the results annually. The latest available data are for calendar
year 2006. See OECD announcement of preliminary 2006 data at [
document/17/0,3343,en_2649_201185_38341265_1_1_1_1,00.html ].

measured in terms of GNI or annual budgets. They point out that the United States
is the largest provider of foreign assistance in monetary terms among all donors,
often providing a quarter of all ODA disbursements tracked by the DAC.
Critics of large increases in foreign aid believe that many developing countries
lack the capacity to absorb large inputs of assistance, and that such levels could
overwhelm weak government institutions, including health care and education
systems. For example, some USAID missions have expressed concern that the health
care systems in some PEPFAR countries are not capable of sustaining the large
amount of HIV/AIDS funds that have increased precipitously in recent years, and are
proposed to climb further under the President’s pledge to double funding in the
FY2009-FY2013 time frame.20
Observers also contend that large increases in aid run the risk of creating
recipient country dependency from ill-designed projects created in the immediate
aftermath of large infusions of funds to aid programs. Such a situation does not
square with the underlying notion that nations should eventually graduate from
assistance. They believe, instead, that U.S. aid agencies should focus on quality
programs that reward countries taking the necessary steps to promote their own
development. In other words, aid policy should be concerned with outcome rather
than input, a criticism also shared by those advocating aid increases. Others believe
that the budget should be based on need and demand, rather than on any arbitrary
formula. This would entail a demand-driven approach with greater field
Figure 4. Proposals for Increased Aid

. D
40 Cu
Current (1.2% ofIncrease 1% of0.7% of GNI
Budget/ 0.22% GNI)Budget
Source: CRS calculations based on the FY2008 budget request.
20 Author interviews, Summer 2007.

Policy Options
The topic of foreign aid reform and reorganization has existed nearly as long as
foreign aid programs themselves. In fact, the creation of USAID in the Kennedy
Administration was partly an effort to bring coordination to aid programs that had
developed across government agencies. Since then, there have been numerous
studies of how best to organize foreign aid in order to increase its effectiveness and21
to support U.S. interests.
There are at least three paths Congress can consider with regard to policy
options. One is to maintain the status quo, with all the attributes described herein.
A second is to maintain the Foreign Assistance Act of 1961, as amended, but further
amend it to reflect the challenges of the 21st Century, and possibly to support a
different mix of assistance by refocusing goals, strategies, and programs. As outlined
below, those include refocus assistance; change or better define the role of the
Department of Defense; change the use of multilateral instruments and organizations;
and create a unified budget.
Another path, and arguably a more ambitious one, is to reorganize the current
aid infrastructure to achieve congressional objectives. This could entail a re-write of
the Foreign Assistance Act of 1961. As outlined below, structural reform options
include elevate USAID to a cabinet-level department; merge USAID into the State
Department; create a new aid agency with increased jurisdiction; and improve
interagency coordination.
Reform Options
Refocus Assistance
With the growth in objectives, priorities, and programs, some reform proponents
have suggested that donor countries should refocus their programs on more defined
goals. They suggest that a country’s aid programs should focus on particular sectors,
regions, or objectives, preferably based on the strengths a donor has to offer recipient
countries. 22
Other donor countries have undertaken reforms to refocus their foreign
assistance, or have initiated reviews of their programs. Sweden recently announced

21 For more information on these many efforts, see “Foreign Aid Reform Commissions,
Task Forces, and Initiatives: From Kennedy to the Present,” by Larry Nowels, in Security
by Other Means: Foreign Assistance, Global Poverty, and American Leadership, Lael
Brainard (Ed.), Washington, D.C.: Center for Strategic and International Studies, Brookings
Institution Press, 2007.
22 This approach is consistent with the Paris Declaration on Aid Effectiveness, signed by
OECD members, including the United States, in 2005. The Paris Declaration calls for donor
coordination, among other items, such as measuring progress and recipient country
involvement in development planning.

that it would reduce the number of recipient countries from 70 to 33 while
maintaining the same level of funding.23 Programs will focus on three categories of
countries: those in need of long-term development, largely poverty reduction projects
in Africa; those in conflict or post-conflict situations, such as Afghanistan, Colombia,
Iraq, Liberia, and Sudan; and eastern European countries in order to deepen
cooperation and European integration. France’s new government has proposed
linking its aid to the good governance practices of recipient nations. Government
officials have said that France’s aid programs should be streamlined with clear
priorities and limited scope, and should focus on “one or two strategic aims.”24
A refocused U.S. aid program could be one that identifies a limited number of
objectives or priorities, and then directs funding for those objectives. The objectives
chosen would have implications for the regional distribution of aid, as for example,
an objective to alleviate poverty would benefit Africa at the expense of other regions.
At its most extreme, this approach would entail a dramatic scaling back of U.S. aid
activities that do not support the chosen focus, and could also mean a reduction in the
number of countries receiving U.S. assistance. A less drastic refocusing could be
similar to the process undertaken in 2006 that produced the Strategic Framework for
Foreign Assistance that linked assistance to five strategic objectives. This approach,
as currently managed, does not overcome problems of coherence and coordination
among U.S. government agencies.
Change/Define Role of Defense Department
The role of the Department of Defense in foreign aid activities has increased in
recent years, largely in response to stabilization and reconstruction activities in Iraq
and Afghanistan. The proportion of DOD foreign assistance has increased from 7%
of bilateral official development assistance in calendar year 2001 to an estimated
20% in 2006. Defense activities include the provision of humanitarian assistance and
training in disaster response, counter-narcotics activities, and capacity building of
foreign militaries.25 Much of this assistance is managed by the Defense Security
Cooperation Agency (DSCA).
The increased role of DOD in foreign assistance has been debated both within
military and civilian circles. Secretary of Defense Robert Gates has stated that U.S.
civilian development assistance agencies need to be reinvigorated, and that until they

23 “Sweden Cuts List of Foreign Aid Recipients to Focus on Africa,” Agence France Press,
August 27, 2007.
24 “France Considers Tying Foreign Aid to Firm Conditions,” Agence France Press, July 17,
2007, “Aide au développement — Les quatre conditionalités de la France,” All Africa, July

19, 2007. See also Overcoming 40 Years of Failure: A NewRoad for Sub-Saharan Africa,

Standing Senate Committee on Foreign Affairs and International Trade, Senate of Canada,
February 2007.
25 Foreign military capacity building is carried out under authority of Sec. 1206 and Sec.
1207 of the National Defense Authorization Act of 2006 (P.L. 109-163), as amended by the
John Warner National Defense Authorization Act of 2007 (P.L. 109-364). DOD implements
the IMET and FMF programs, although the funds are appropriated to the State Department
with decisions on recipients made by the State Department.

are strengthened, the military will have to engage in reconstruction activities.
Advocates of a greater role for DOD argue that the military is often in the best
position, with personnel on the ground, to provide timely assistance in conflict and
post-conflict situations, and in response to natural disasters. Further, they say, DOD
has more flexibility in the allocation of assistance. Finally, DOD has the resources
and technical capacity to provide timely assistance in many cases.
Those who are concerned about the increased DOD profile warn that it results
from a diminution of personnel expertise at USAID and State, and that it will further
contribute to this problem. Critics believe that DOD is supplanting and eroding the
traditional role of the State Department and USAID, agencies that critics argue
should be in charge of these types of policy decisions. Further, they caution that
there may not be the degree of coordination among these three entities that they argue
is necessary to achieve U.S. foreign policy objectives. Others believe, however, that
requirements that involve the Secretary of State in the decision-making process
ameliorate this concern. Still others contend that DOD programs can be duplicative
and are better carried out by civilian agencies. Finally, many believe that aid
programs detract from DOD’s primarily military function.
Any redesign of foreign aid programs would likely take into account the role of
the Defense Department. Options for addressing the role of DOD include making the
Defense Security Cooperation Agency a co-managed entity between the Department
of Defense and the Department of State, or moving the DSCA into a new aid agency.
Another option is to bring the DSCA under the control of an interagency coordinating
Change Use of Multilateral Organizations
In addition to bilateral assistance, the United States contributes to multilateral
institutions that carry out development activities. These institutions include
international and regional organizations, such as the United Nations and the
Organization of American States, and multilateral banks, such as the World Bank,
Inter American Development Bank, Asian Development Bank, African Development
Bank, and European Bank for Reconstruction and Development.
Since FY2000, the share of funds that the United States provides (not including
assessed dues to some international organizations) has averaged a little less than 8%
of the total amount appropriated for foreign assistance programs. The lowest point
occurred in FY2003 with 6.8%. Previous to the 2000s, the United States contributed
a higher share. The average during the 1980s was nearly 11%, and nearly 13% in the

1990s. Figure 5 shows the ratio of multilateral aid to total foreign aid since 1981.

Decreases since 2003 can be attributed to the large increase in bilateral assistance in
light of new initiatives such as PEPFAR and MCC.
Congress may consider the desired level of U.S. contributions to multilateral
institutions. There have been disagreements between the Administration and
Congress on the use of multilateral institutions. The debate on funding levels for the
U.S. contribution to the Global Fund for AIDS, Tuberculosis and Malaria is one
example, where Congress has consistently provided more funds than requested by the

Proponents of a greater use of multilateral institutions believe that these
organizations are better suited to carry out development activities because they can
pool the resources of member nations and, as a result, can bring more funds to any
particular country or problem. They argue that these organizations often fund large
infrastructure projects, activities in which USAID no longer engages.26 Others
believe that they can tackle long-term development issues with a longer and more
consistent commitment of resources. Some also contend that multilateral institutions
often have better credibility in recipient countries and are not burdened by possibly
poor relations that may exist between some donor and recipient countries. Those
who advocate greater flexibility observe that multilateral assistance often is not
subject to as many statutory restrictions in both appropriations and authorization
Critics of multilateral institutions argue that they lack accountability and
transparency in how funds are spent and how policy decisions are made. They
believe that the United States would not have enough say in how assistance is
provided and to whom, possibly resulting in situations where U.S. funds are going
to support governments with which the United States has serious policy differences.
Others contend that a greater use of multilateral institutions will mean that the United
States will not get acknowledgment from the recipient countries for its foreign aid
Figure 5. Share of Multilateral Assistance, FY1981-FY2008

16.0%al A
10.0% M
6.0% Sh
81 83 85 87 89 91 93 95 997 99 01 03 05 07
19 19 19 19 19 19 19 19 1 19 20 20 20 20
Source: Enacted foreign operations appropriations bills, and CRS calculations.
Notes: FY2008 is based on the budget request. Figures do not include supplementals and
periodic IMF replenishments that occurred in 1981, 1984, 1993, and 1999.
26 It should be noted, however, that the United States does fund some large infrastructure
projects through the Millennium Challenge Account. See CRS Report RL32427, The
Millennium Challenge Account, by Curt Tarnoff.

Create a Unified Budget
In the parlance of the U.S. budget, international affairs comprises Function 150
spending, while the defense budget is considered Function 050. Function 150 is
appropriated through the annual State Department, Foreign Operations, and Related
Programs appropriations bill, while Function 050 is largely appropriated through the
Defense and Military Construction appropriations bills.
Programs in domestic agencies that provide some type of foreign assistance are
not included in Function 150. Instead, those funds are requested and approved within
their own budgets. This situation has led observers to criticize U.S. aid as being
uncoordinated and lacking transparency, as there are no central reporting
requirements. It is difficult to ascertain how much the United States spends in some
sectors that receive assistance from various agencies, such as health (USAID, State,
HHS, CDC), education (State, USAID, Department of Education), or environment
(State, USAID, Department of the Interior, Department of Agriculture, EPA, NOAA,
U.S. Forest Service, U.S. Fish and Wildlife Service), for example.
There are several related proposals to create some sort of unified budget.
Unified Function 150 Budget or Budget Presentation. One proposal
is to include all foreign assistance spending in Function 150 with the budgeting
process coordinated by the lead aid agency, although program specifics would be
developed by the agency providing the assistance. Under this scenario, funds would
still be part of the various agencies, but the budget request would be unified and
presented by the head of the aid agency. A related option is to maintain the current
function categories, but have the Administration present a congressional budget
justification that includes all foreign assistance programs government-wide.
Proponents believe such a unified budget, or presentation, would provide Congress
with a fuller picture of the totality of foreign aid, and assist in making policy
decisions. This option would also offer the possibility of being able to identify
redundancies and inconsistencies in programs. Critics would argue that reorganizing
budget functions would be time consuming, and that the issue of coordination could
be achieved through other means.
Unified National Security Budget. Another option is to combine Functions
050 and 150 into a national security budget. While the Defense base budget request
for FY2008 totals $483.2 billion, the foreign aid budget of $24.4 billion pales in
comparison. Combining the two would offer the advantage of coordinating the
programs and funding levels among the three main agencies providing assistance.
Proponents believe that this option would increase transparency, and reduce
duplication of aid programs. Critics argue that including foreign assistance in a
national security budget that consists mostly of defense spending would present the
wrong image for USAID as an independent civilian agency, and one whose mission
is fundamentally different from that of DOD. In addition, critics do not believe that
the proposal would result in additional foreign assistance, unless the foreign aid
budget is fenced within a national security budget.

Restructuring Options
Elevate USAID to Cabinet-Level Department
The impetus behind the proposal to create a cabinet-level department is to put
foreign assistance on an equal footing with diplomacy and defense, consistent with
its elevation as a pillar of U.S. national security. In addition, other donor countries
have, in recent years, given their aid agencies increased standing on a par with their
foreign and defense ministries, the most often cited being the United Kingdom’s
Department for International Development (DFID).27
As a cabinet department, it is believed that a Secretary for Development would
be better able to work as an equal with other department heads in order to coordinate
aid programs government-wide. It would also operationalize the rhetoric of elevating
the importance of global development. In addition, there is the possibility that a
department would attract experienced development professionals, who have left
USAID as its operating budget has continued to decline.
Some critics oppose the idea on the grounds that other equally important
agencies are not in the cabinet, and that USAID should remain under the foreign
policy direction of the Secretary of State. Others believe that even as a cabinet
agency, USAID would not be equal to the more powerful Departments of State and
Defense. Some would also argue that USAID controls just 20% of foreign
assistance,28 with the remaining controlled by the State Department and other
independent aid agencies, such as the Millennium Challenge Corporation. In
addition, the option does not formally provide for better government-wide
Merge USAID into State Department
As currently structured, USAID is an independent agency, but as provided in
reorganization legislation in 1998, it takes foreign policy guidance from the Secretary
of State. Some observers have suggested that the F bureau’s location in the State
Department has made USAID a subordinate entity in terms of both policy and
budgeting. Some have termed these events as a stealth merger. A previous attempt
to merge USAID into the State Department failed in 1998, when the U.S. Information
Agency (USIA) and the Arms Control and Disarmament Agency (ACDA) were
abolished and their functions folded into State (P.L. 105-277).

27 See Owen Barder, “Reforming Development Assistance: Lessons from the U.K.
Experience,” in Security by Other Means: Foreign Assistance, Global Poverty, and
American Leadership, Lael Brainard (Ed.), Center for Strategic and International Studies,
and the Brookings Institution Press, 2007.
28 Figures are based on the FY2007 foreign operations appropriated levels. USAID
implements and co-manages some State Department aid programs, but many would argue
that State decides the allocation of those funds.

During the debate that unfolded over several years, proponents contended that
better coordination could not be accomplished with USAID remaining an
independent agency. As separate agencies, the State Department and USAID at times
have had conflicting agendas, duplicative functions; USAID programs, according to
reformers, did not at times properly reflect national priorities. They also maintained
that having foreign assistance managed by the State Department would result in a
better use of scarce resources. Both arguments are relevant in the current debate.
Proponents note that the State Department’s aid budget already dwarfs that of
USAID, controlling nearly 64% of funds provided by foreign operations
appropriations for FY2007.29 In addition, supporters contend that having the
Secretary of State in charge of foreign assistance would raise its profile, and result
in better coordination of programs located in other agencies. Current merger
proposals call for the official in charge of aid at the State Department to have a high
rank, and for a merger of the two foreign services so that USAID officials could be
considered for ambassadorships.
Opponents countered, then as now, that the State Department and USAID have
different and distinct missions. The State Department primarily focuses on resolving
short-term crises through diplomacy, while USAID pursues long-term development
achievements that could be compromised by the Department’s need to shift funds for
crisis management. Critics believe that aid policy would be diminished within State,
pointing out that moving USIA into State in 1998 did nothing to raise the profile of
public diplomacy, and many would argue, did the exact opposite. Critics also argue
that the State Department lacks both an interest in aid programs and the expertise in
managing them, a view that was confirmed by a recent GAO report.30 Finally, a
merger does not formally address the coordination of aid programs government-wide,
instead relying on the level of prestige and interest of the Secretary of State.
Create Aid Agency with Increased Jurisdiction
Another possibility is to create an aid agency by giving it jurisdiction over all
U.S. foreign assistance, including that provided by the State Department and
domestic agencies. Under such a scenario, it may not be necessary to elevate it to the
cabinet; its importance would derive from it having the full range of aid programs in
its portfolio.
To be successful, it is believed that a new agency would need to have all current
USAID and State Department programs, including PEPFAR, as well as those of
independent agencies under its umbrella, such as the Millennium Challenge
Corporation, the Peace Corps, the Overseas Private Investment Corporation, and the
Trade and Development Agency. Organizationally, it is suggested that the agency

29 State’s aid portfolio has increased in recent years by the decision to locate large aid
programs, such as GHAI, at the State Department. Other sizeable programs managed by
State, although they may be implemented by other entities such as USAID and DOD,
include FSA, SEED, ACI, ESF, FMF, IMET, INCLE, PKO, ERMA, and the Democracy
30 U.S. Government Accountability Office, Department of State: Human Capital Strategy
Does Not Recognize Foreign Assistance Responsibilities, September 2007.

would have bureaus that correspond to functions, such as humanitarian assistance and
disaster response, long-term development, health, security and military assistance,
trade, and innovative programs, such as MCC and the Global Development Alliance
(GDA).31 While it may be politically difficult to move the programs of domestic
agencies into this new entity, a system of liaison offices could be instituted instead.
For example, say proponents, a Centers for Disease Control and Prevention (CDC)
and a Health and Human Services Department (HHS) liaison office co-located in the
health bureau would increase coordination and program formation.
With all aid programs in its portfolio, it is believed that the agency would be in
a better position to monitor and evaluate program effectiveness. In this view, it
would also be able to provide the coordination necessary to avoid duplication and
programs working at cross purposes. Proponents say that a re-invented aid agency
would be able to enhance its human capital capacity by bolstering its cadre of
development experts, and that the agency would become the lead government entity
on policy, implementation, and research.
On the other hand, the proposal could be criticized for creating a large new
bureaucracy that may be no better at managing foreign assistance than the current
structure. Without a clearly thought out strategy and objectives to guide foreign aid,
the organization of aid delivery would matter little. Others believe that independent
agencies have been created with a specific mission and that those missions could well
be downgraded or neglected in a larger organization. Still others contend that
development assistance, with its focus on poverty alleviation and long-term
development, should not be co-located with security and military assistance, much
for the same reasons, they would argue, that USAID should not be merged with the
State Department.
Improve Interagency Coordination
There have been previous attempts to improve interagency coordination of aid
programs; the most often cited are the Development Coordination Committee (DCC)
and the International Development Cooperation Agency (IDCA). Both were
considered unsuccessful. However, there are other examples of interagency
coordinating mechanisms outside of the aid field, such as the National Security
Council, the Director of the Office of National Drug Control Policy, and the Council
on Environmental Quality.32 The need for some type of coordination is evidenced by
the growth in the number of agencies and departments that administer some type of
foreign assistance program. There is little coordination or joint policy development
among these entities, leading many observers to characterize U.S. aid programs as
fragmented and vulnerable to programs and agencies working at cross-purposes. In
many cases, existing departments have adopted an aid component. In other cases,

31 The Global Development Alliance forms partnerships with private capital to carry out aid
32 For more information on coordinating mechanisms, see CRS Report RL31357, Federal
Interagency Coordinative Mechanisms: Varied Types and Numerous Devices, by Frederick
M. Kaiser.

new independent agencies have been created with specific mandates, the most recent
being the Millennium Challenge Corporation, created in 2004.
The U.S. report to the OECD provides information on the contributions of
various government entities providing aid. Those entities totaled 28 in calendar year
2006.33 The percentage of ODA provided in calendar year 2006 (Figure 6) from
agencies other than the Department of State and USAID totaled 42%. The following
entities, excluding the State Department and USAID, are drawn from the DAC
!Cabinet-level departments.
! Agriculture.
! Defense.
! Commerce.
! Energy.
!Health and Human Services.
! In terior.
! J u st i ce.
! Labor.
! Treasury.
!Sub-cabinet organizations.
!Centers for Disease Control and Prevention (CDC)
!National Institute of Standards and Technology (NIST).
!U.S. Patent and Trademark Office (PTO).
!National Oceanic and Atmospheric Administration (NOAA).
!U.S. Fish and Wildlife Service (USFWS).
!U.S. Forest Service (USFS).
!Independent Agencies.
!Millennium Challenge Corporation.
!Environmental Protection Agency.
!Peace Corps.
!African Development Foundation.
!Inter-American Development Foundation.
!Trade and Development Agency.
!Export-Import Bank.
!Overseas Private Investment Corporation.
!U.S. Institute of Peace.
!National Science Foundation.

33 The USAID website states that “over 50 separate government units carry out aid-related
activities overseas,” but does not include a list of those entities. See “USAID-US
Government Coordination,” at [
coordination.html]. In addition to the departments identified above, in calendar year 2004,
the Department of Transportation and the Department of Homeland Security reported ODA
contributions. Also not included are those agencies that are represented at U.S. embassies
in a liaison capacity to foreign governments, such as the Federal Bureau of Investigation,
and the Drug Enforcement Administration.

Figure 6. Distribution of ODA by Agency, CY2006
(Percentage of Net ODA, Bilateral and Multilateral

Source: USAID, report to the OECD.
Notes: The OECD Development Assistance Committee (DAC) tracks disbursements on a
calendar year basis, rather than appropriations on a fiscal year basis. Consequently, these
figures do not align with ratios of State to USAID appropriations, because USAID
implements many State programs, and would report the corresponding disbursements.
Notwithstanding these issues, the data is a reliable source of information on the aid activities
of all government agencies.
The other category includes Departments of Commerce (0.04%), Energy (0.16%),
Labor (0.29%), and the Interior (0.81%); African Development Foundation (0.08%); Inter-
American Development Foundation (0.08%); Trade and Development Agency (0.22%);
Environmental Protection Agency (0.31%); Export-Import Bank (6.7%); Millennium
Challenge Corporation (0.65%); and the U.S. Institute of Peace (0.01%). It should be noted
that ODA does not include military assistance programs such as Foreign Military Financing,
and International Military Education and Training, managed by the State Department; nor
does it include the costs of military operations.
There are a number of options available to policy makers to improve interagency
coordination. These options range from maintaining the current foreign aid structure,
with possible modifications to improve coordination; creating a coordinating entity
with the authority to marshal the resources of various government entities, or elevate
USAID, or a successor aid agency, within the National Security Council structure.
Create a Coordinating Entity. This option would be similar to the
Development Coordination Committee (DCC), or the International Development
Cooperation Agency (IDCA). The DCC was authorized by Sec. 640B as an
amendment to the Foreign Assistance Act of 1961 to advise the President on the
coordination of policies and programs affecting developing countries. The DCC was
established by executive order in 1973, with the USAID Administrator as chair, and

was later revoked by executive order in 1999.34 The DCC reportedly did not function
well for a variety of reasons, including a lack of White House commitment to foreign
aid programs, and the difficulty in having an agency (USAID) trying to coordinate
the activities of Cabinet departments.
The International Development Cooperation Agency was inspired by proposed
legislation to coordinate all government foreign assistance programs. The agency
created by President Carter in 1979 by executive order was a much weaker
organization than that envisioned by its chief legislative sponsor, Senator Hubert
Humphrey. Considered understaffed and with a jurisdiction limited largely to just
USAID, the IDCA ceased to function in the Reagan Administration.
Any new coordinating entity would need a commitment from the White House,
and strong leadership at its helm with the authority to coordinate across department
jurisdictions. Consideration could also be given to providing the position with
authority to coordinate the foreign aid budgets of all ODA-contributing agencies.
Elevate Aid Agency Within NSC Structure. The National Security
Council (NSC) serves as the President’s principal forum for considering national
security and foreign policy issues, and coordinating policies among government
agencies. The NSC was established by the National Security Act of 1947 (P.L. 235-

61 Stat.496; U.S.C. 402). By statute, members include the President, Vice President,

Secretary of State, and Secretary of Defense, and by executive designation, the
Secretary of the Treasury and the Assistant to the President for National Security
Affairs. The Chairman of the Joint Chiefs of Staff is the statutory military advisor,
and the Director of National Intelligence is the intelligence advisor. Other various
department heads are invited to attend meetings as appropriate. USAID participates
at the NSC through the Policy Coordination Committee (PCC), which is a unit of the
NSC charged with policy coordination.
The proposal to elevate a U.S. aid agency within the structure of the NSC is
predicated on three observations. First, the U.S. National Security Strategy, as
articulated in 2002 and restated in 2006, elevates global development as a third pillar,
along with defense and diplomacy, of national security. Yet, little structural change
has been made to reflect this elevation in the importance of USAID’s work. Second,
the lack of success in past attempts has been attributed to either a lack of interest on
the part of the White House, and to the USAID Administrator lacking the rank
necessary to coordinate other cabinet departments. Third, the current participation
of USAID at the Policy Coordination Committee level may not be high enough to
accomplish effective coordination.
There are numerous possible mechanisms to raise the status of development
within the NSC structure. Congress could statutorily designate the head of a U.S. aid
agency, whether or not it is cabinet-level, to NSC membership. As such, this person
would participate in all national security-related debates. Alternatively, Congress
could designate an aid coordinator within the NSC with the authority to convene
regular meetings with the relevant agency heads. Several committees exist within the

34 The DCC structure remains in the FAA as an unimplemented provision.

NSC, such as the Committee on Transnational Threats, and the Committee on
Foreign Intelligence. A possible option is to create a committee on foreign assistance
with the central mission of developing aid policy and providing government-wide
Maintain Status Quo With or Without Minor Modifications. Some
policy makers may eschew the idea of a formal coordinating mechanism as creating
an additional level of bureaucracy that would do little to improve aid effectiveness.
Coordination exists at the field level among agencies represented at U.S. embassies.
At a policy planning level, they can point to the development of interagency
coordination that has arisen among Defense, State and USAID. At least two
combatant commands (Southcom and Africom) are integrating civilian agencies at
headquarters with the objective of coordinating aid activities better. At the newly
operational Africom, plans are for a senior State Department foreign service officer35
to hold the position of deputy to the commander for civil-military activities. With
the increase in DOD providing aid, both the State Department and USAID have
created offices (Office of Political-Military Affairs at State, and the Office of Military
Affairs at USAID) to manage the relationship.
Advocates of a less formal coordinating approach contend that aid levels of
other agencies are a small fraction compared to that provided by USAID, State, and
DOD combined, which reached 76% of ODA in calendar year 2006. There is also
the possibility that the DFA’s mandate could be expanded to include all U.S. foreign
assistance, although such an approach, led by a sub-cabinet officer, may not result in
the full cooperation of all cabinet departments.
Re-write the Foreign Assistance Act
An issue in the current debate on foreign aid reform is whether it is necessary
or practicable to replace the current law governing U.S. aid programs, the Foreign
Assistance Act of 1961, (FAA) as amended. The debate may be resolved based on
the degree of proposed reforms. The more ambitious, such as a Cabinet-level aid
agency, would call for authorizing legislation. To refocus assistance, whether by
region, sector, or purpose, may not require a new FAA.
The Foreign Assistance Act of 1961 has not been comprehensively reauthorized
since 1985. Instead, Congress has considered and enacted single-issue foreign aid
legislation, some of which have been incorporated into the Foreign Assistance Act.
These laws have authorized assistance to the former Soviet Union (FREEDOM
Support Act), eastern Europe (SEED Act), and established new funding platforms,
such as the President’s Emergency Plan for AIDS Relief (PEPFAR), and the
Millennium Challenge Corporation.
Supporters of a comprehensive re-write of the FAA argue that the 1961 law is
largely a Cold War document that is out of date with current issues and absent the

35 “Africa Command Works to Become Effective,” Department of Defense Documents,
American Forces Information Service News Articles, October 5, 2007, and “Making Room
for Civilians, Southcom Organization Could Be ‘Model,’” Inside the Army, October 8, 2007.

policy direction needed to guide U.S. foreign assistance in the 21st Century. Many
point out that the Act identifies over 33 major objectives, 75 priorities, and 247
directives36 for U.S. aid, many added through subsequent reauthorizations and
amendments, but does not prioritize them. The history of changes to the FAA has
also produced what many believe is a list of program restrictions, conditions, and
reporting requirements that can be either outdated, conflicting, or both. They further
argue that other statutes passed by Congress as stand-alone legislation (i.e., they were
not incorporated into the FAA), complicate efforts to revise and update current law,
to fully understand the implications of new legislation or the obstacles that exist in
existing provisions, and to provide coordination and coherence to the complete
complement of U.S. aid programs.
Others believe that a complete re-writing of the FAA is not necessary, and that
the political difficulties in passing such legislation may doom needed aid reforms.
For any priority listed in the FAA, there are likely supporters who would oppose its
removal, or a lessening of the priority accorded to it. Instead, they argue, reform
efforts should focus on policy development, coordination, and implementation of
existing programs. Even more ambitious reforms, except for the creation of a new
assistance entity, could be accomplished within the existing statutory framework that
grants the President the necessary authorities to administer foreign aid programs, and
with single-issue legislation to authorize new initiatives.
Major Reform Report Recommendations
The recognition that foreign aid serves important national interests, together
with annual increases in foreign aid budgets since 9/11, has produced several
government- and non-governmental-sponsored studies of how to raise the profile of
foreign assistance, provide better coordination, and improve aid effectiveness. In the
last year, several reports from three organizations have generated a considerable
amount of interest. For clarity and comparability, each entity’s recommendations,
provided below, have been organized by the subject areas of budget, structure, and
policy options, although some recommendations have implications for all three areas.
HELP Commission
The HELP Commission was created by the Helping to Enhance the Livelihood
of People Around the Globe Commission Act (HELP Commission Act, 22 USC
2394b). Introduced by Representative Frank Wolf in October 2003, and passed by
Congress as Sec. 637 of the Consolidated Appropriations Act, FY2004 (P.L. 108-
199), the Act called for a commission to study and report on U.S. foreign
development assistance programs. The Commission began operations in 2005 and
issued its report, Beyond Assistance, in December 2007. The Commission was
composed of 21 members: 6 appointed by the President, 4 each appointed by the

36 Steven Radelet, Center for Global Development, “Foreign Assistance Reforms: Successes,
Failures, and Next Steps,” Testimony and Responses to Questions for the Record for the
Senate Foreign Relations Subcommittee on International Development, Foreign Assistance,
Economic Affairs, and International Environmental Protection, June 12, 2007.

Speaker of the House and Senate Majority Leader, and 3 each appointed by the
House Minority Leader and Senate Minority Leader, with the Administrator of the
U.S. Agency for International Development serving as an ex officio member.
The Commission was charged with identifying past and present objectives of
U.S. development assistance, analyzing whether such assistance should be used as
a means to achieve U.S. foreign policy objectives, and considering how to evaluate
the performance of aid programs. The Act called for a comprehensive review of
policy decisions, delivery obstacles, and best practices. The Commission held a series
of meetings with development experts, and conducted study missions to aid recipient
countries. It looked at both the efficiency and effectiveness of aid programs
government-wide, including development, security, humanitarian, and food
Major HELP Commission recommendations include the following:
Policy. In general, the HELP Commission recommends that there be a
recognition that security and development reinforce each other.
!Rewrite the Foreign Assistance Act of 1961 to reflect current and
anticipated world conditions.
!Build vibrant private sectors by increasing U.S. technical assistance
and funding for small and medium businesses that do not have
access to private capital.
!Renew efforts to improve agricultural productivity and related
industries in the developing world, including taking actions to
minimize the effects of domestic agricultural subsidies and to
encourage G-8 countries to do the same. Increase the local purchase
of food aid.
!Form partnerships with local public and private entities to increase
demand-driven programs.
!Leverage non-governmental actors and growth in philanthropy and
private investment through programs like the Global Development
Alliance (GDA).
!Align U.S. trade and development policies. One suggestion is to
allow duty-free, quota-free provisions for MCC-eligible countries
and for the poorest countries with a per capita Gross Domestic
Product below $2,000.
!Establish a Quadrennial Development and Humanitarian Assistance
Structure. The HELP Commission did not reach a consensus on an
organizational structure, although the majority of commissioners supported a
redesigned Department of State. A strong minority also supported the creation of a
cabinet-level department for global development.
!Create a new combined USAID and Department of State called the
International Affairs Department to reflect the elevation of
development as a pillar of national security. The new department
would have four sub-cabinet agencies reporting to the Secretary:

economic affairs, development, and trade; humanitarian services and
stabilization; political and security affairs; and public diplomacy and
consular affairs. The report argues that this is not to “simply move
USAID into the current Department of State. It would completely
reorganize these and other agencies and departments by functions to
ensure a coordinated, coherent approach.” (Page 15, Executive
!Establish an entity to conduct research and development modeled on
the Defense Advanced Research Projects Agency (DARPA) that
would create and commercialize technological products that would
benefit developing countries.
!Establish a high-level mechanism to coordinate aid policy for all
government agencies in the Executive Office of the President,
possibly within the National Security Council.
!Strengthen the Office of the Coordinator for Reconstruction and
Stabilization, and implement the Administration proposal for a
Civilian Response Corps.
Budget. The HELP Commission recommends increases for the international
affairs budget that could result in a doubling of foreign assistance funding.
!Create a unified national security budget combining Functions 050
and 150, and fencing as much as 10% for international affairs
activities. Ten percent of such a budget would result in a doubling
of current foreign aid levels.
!Improve the monitoring and evaluation, human resources, and
procurement and contracting capabilities of U.S. international affairs
agencies. This includes strengthening staff resources devoted to
development and doing away with the Operating Expense account.
!Agree on uniform procedures for reprogrammings and congressional
!Consolidate and realign the foreign aid account structure.
!Establish a permanent Humanitarian Crisis Response Facility funded
at $500 million and a Transitional Security Crisis Fund.
!Clarify DOD’s role in development assistance by ensuring adequate
funding for State and USAID programs in areas in which DOD is
Senate Foreign Relations Committee
The minority of the Senate Foreign Relations Committee issued two reports in
the last two years on aspects of U.S. foreign assistance programs. The first,
Embassies as Command Posts in the Anti-Terror Campaign (S. Prt. 109-52), was
issued in December 2006 and focused on the growing role of the Department of
Defense in foreign assistance programs. The second, Embassies Grapple to Guide
Foreign Aid (S. Prt. 110-33), was issued in November 2007 and examined the
implementation of the new Strategic Framework for Foreign Assistance from a field
perspective. Both reports made reform recommendations.

Policy. Similar to the HELP Commission report, the SFRC recommends a
strategic approach that incorporates both security components and humanitarian
!Design a foreign assistance strategy that integrates national security
needs and a humanitarian imperative.
!Congress should
!move expeditiously on ambassadorial nominations and
funding decisions;
!overhaul the Foreign Assistance Act of 1961, and
implement a two-year reauthorization schedule; and
!agree on reprogramming levels below which
congressional notification is not required, on a three-
year pilot program.
!Give ambassadors more decision-making authority over military-
related assistance programs.
Structure. The Senate report recommends separating the DFA and USAID
Administrator’s positions, and to reorganize USAID to give it a voice at higher levels
of government, even while the Secretary would have enhanced authority over aid
!Give the Secretary of State the authority to ensure all aid,
government-wide, is in U.S. foreign policy interest. Secretary
should provide strategic direction, transparency, and accountability.
!The F process should be redesigned to
!make decision-making clearer and more accountable;
!make the DFA a position on which the Senate would
advise and consent as Deputy Secretary of State;
!give the DFA authority to prepare a unified aid budget
and to referee funding disputes;
!expand DFA’s responsibility to all government aid
programs, including DOD; and
!create Deputy Assistant Secretary positions for
programs at regional levels, similar to the State
Department’s SEED Coordinator.
!USAID should be reorganized to
!separate the USAID Administrator’s position from that
of DFA;
!give the USAID Administrator an independent presence
on the President’s highest level inter-agency councils on
foreign aid issues, while still remaining under the policy
guidance of the Secretary of State; and
!give USAID officers more opportunities to achieve
!Ambassadors and Deputy Chiefs of Mission (DCMs) should be
trained in foreign assistance.

Budget. Like the HELP Commission report, the Senate report supports the
concept of a unified budget and increased resources for both aid programs and
USAID operations.
!Create a unified aid budget managed by the DFA.
!Strengthen USAID’s in-house expertise and increase its resources,
including its Operating Expense account.
!Increase resources for function 150 accounts to prevent the
migration of aid programs to the Department of Defense.
!Executive-legislative relations and communication should be
improved as a way to lessen the need or motivation for congressional
directives and limitations.
Center for Strategic and International Studies (CSIS)
The CSIS Commission on Smart Power, chaired by Richard L. Armitage and
Joseph S. Nye Jr., issued a report, A Smarter, More Secure America, in November
2007. The report’s findings and recommendations are far-reaching and extend
beyond foreign assistance. In general, the report advocates that hard power, as
exercised by military might, be integrated with soft power, as conducted through
diplomacy and development initiatives, thus resulting in “smart power.” Among the
recommendations with regard to foreign assistance are the following:
Policy. The CSIS report recommends a more engaged U.S. foreign policy that
encompasses all aspects of international relations. Like both the HELP Commission
and SFRC reports, it recognizes the inter-relation between security and development.
!Make greater investments in multilateral institutions such as the
United Nations, the World Bank, and IMF. With regard to the
United Nations, the report recommends a greater use of U.N.
vehicles in the areas of peacekeeping and peacebuilding, counter-
terrorism, global health, and energy and climate issues.
!Strengthen the G-8 summit process on routinely addressed issues,
such as energy and climate, nonproliferation, global health,
education, and the world economy.
!Work with local civil society and the private sector for more agile,
innovative, and locally supported aid delivery systems.
Structure. The CSIS report does not endorse a cabinet-level agency, but does
recommend that it have a cabinet-level voice. Like both the HELP and SFRC
reports, it endorses the elevation of development within the organizational structure
of government in order to improve the coordination of development activities
!Create a cabinet-level voice on global development.
!Unify all government assistance programs.
!Create a U.S. Global Health Corporation to build a more unified
approach to development and health.
!Create a smart power deputy under the national security advisor and
the director of the Office of Management and Budget.

!Improve inter-agency coordination by strengthening department
executive secretaries with an adjunct standing coordination center.
!Establish a Quadrennial Smart Power Review.
Budget. Consistent with both the HELP and SFRC reports, the CSIS report
recommends increased funding for foreign assistance programs.
!Elevate the development mission within the U.S. government by
increasing the size of the development and humanitarian budget and
increasing aid effectiveness.
Other organizations and think tanks have studies in various stages of
development. Many hope to be able to offer viable options to a new Administration
and Congress. Most of these organizations support both increased resources and an
elevated visibility for assistance programs. Disagreement remains on whether a new
structure and authorizing legislation is needed, and what any new structure would
look like.

Appendix. Acronyms
Funding Accounts:
ACIAndean Counterdrug Initiative
CSHChild Survival and Health
DADevelopment Assistance
DFDemocracy Fund
ERMAEmergency Refugee and Migration Assistance
ESFEconomic Support Fund
FMFForeign Military Financing
FSAAssistance to the Independent States of the Former Soviet Union
GDAGlobal Development Alliance
GHAIGlobal HIV/AIDS Initiative
IDFAInternational Disaster and Famine Assistance
IMETInternational Military Education and Training
INCLEInternational Narcotics Control and Law Enforcement
MCCMillennium Challenge Corporation
MRAMigration and Refugee Assistance
NADRNonproliferation, Anti-Terrorism, Demining, and Related Programs
PEPFARPresident’s Emergency Plan For AIDS Relief
PKOPeacekeeping Operations
PL 480Food aid
PMIPresident’s Malaria Initiative
SEEDAssistance for Eastern Europe and the Baltic States
TITransition Initiatives
DFADirector of Foreign Assistance
EAPEast Asia and Pacific
EUREurope and Eurasia
WHWestern Hemisphere
NENear East
SCASouth and Central Asia
OECDOrganization for Economic Cooperation and Development
DACDevelopment Assistance Committee