The Cable

USAID bolsters its budget shop

As the development community awaits the results of two major administration reviews, the U.S. Agency for International Development (USAID) is already increasing its ability to manage its own money.

USAID chief Rajiv Shah alerted his staff on Sept. 8 of the creation of the new USAID Office of Budget and Resource Management (BRM), to be led by his senior budgetary advisor Mike Casella. Casella came to USAID after a stint as branch chief for international economic affairs at the White House's Office of Management and Budget and before that was acting vice president for administration and finance at the Millennium Challenge Corporation. Casella will lead a team of 35 to 40 budget specialists throughout USAID who will connect the new office to the regional and functional offices throughout the organization.

The State Department's Quadrennial Diplomacy and Defense Review (QDDR), slated to be released this month, is supposed to resolve lingering questions about the role and stature of USAID as well as how much control it will have over its own policy and funds. But even though that long-awaited document is missing in action, Shah's letter reveals that a decision has already been made to give USAID an increased role in developing and then justifying parts of its own budget going forward.

Secretary of State Hillary Clinton "is committed to enhancing USAID's budget capabilities," wrote Shah. "Beginning next year, USAID will have increased responsibility for executing its development and humanitarian assistance budget."

By FY 2013, Shah explained, USAID will be charged with developing a comprehensive budget proposal for its aid programs. These will then be incorporated into a joint State Department and USAID budget review.

He said USAID and the new BRM bureau will work closely with the office of the director of foreign assistance at State. Exactly how those two offices will relate to each other is one of the issues the QDDR is expected to weigh in on.

And while it's still unclear when the QDDR will be released, there are signs that it is finally nearing completion. Final decisions on all major QDDR issues were set to be finalized at the end of August, according to multiple State Department sources, but sources say that as of last week some contentious issues had not yet been resolved.

The Cable's been told that Clinton had been adamant that the QDDR should come out publicly before the White House's Presidential Study Directive on Global Development (PSD-7), the administration's other major development review being run by the NSC's Gayle Smith.

The PSD is reportedly complete, but the public release, which had been scheduled for this week, is being delayed. A source at the U.S. Global Leadership Coalition told The Cable that, earlier this month, the White House had scheduled a public event to roll out the PSD for Sept. 15 -- but that event was later cancelled at the White House's behest. A briefing for Hill staffers was also cancelled.

Tensions between State and the National Security Council have lingered as the two documents charted out conflicting views on some key structural issues, such as whether there will be an oversight mechanism governing overall development policy that would sit outside of the State Department.

A leaked draft of the PSD showed that the White House was in favor of such an idea. The chairman and ranking member of the Senate Foreign Relations Committee also endorsed the idea in their draft foreign aid legislation, calling it the Council on Research and Evaluation of Foreign Assistance (CORE).

The Cable has heard, but have not confirmed, from State Department sources that Clinton was successful in convincing the White House to jettison their call for such an oversight mechanism, leaving the lead role for development policy in Clinton's hands at the State Department.

The development community continues to lament the absence of both documents and the lack of transparency in both processes.

"The administration has done some really positive things for poor people, but they have been slow to move forward with the broad reforms we need to make foreign assistance more effective," said World Food Prize laureate David Beckmann, President of Bread for the World.  "The PSD and QDDR present a real opportunity to move U.S. foreign assistance into the 21st-century."

Shah's full message after the jump:

Sent: Wednesday, September 08, 2010 5:11 PM
Subject: Establishment of the Office of Budget and Resource Management (BRM)

USAID/General Notice



SUBJECT:  Establishment of the Office of Budget and Resource Management (BRM)

One of the themes I have stressed since joining USAID is the importance of accountability for the results of every program and project we implement.  Accountability requires the ability to set clear strategic goals for our development and humanitarian programs, and to measure our results through rigorous impact evaluations, challenges that our new Policy, Planning and Learning Bureau (PPL) are already making significant progress on.  However, equally important to achieving results is our ability to effectively manage our resources.  That is why I am pleased to announce the creation of our new Office of Budget and Resource Management (BRM).

The President and the Secretary of State have challenged us to implement expanded initiatives in global health, food security and climate change, while rebuilding our foreign and civil service staff and changing the way we do business in order to work with new partners and bring innovative new development mechanisms to bear.  The fact that we have been asked to do this at a time when the President and Congress are determined to tackle the budget deficit means that we have to use our resources more efficiently and effectively than ever before to meet these challenges.

The Secretary is committed to enhancing USAID's budget capabilities, and we are working with the Office of the Director of Foreign Assistance (F) on ways that USAID can take on more budgetary responsibility.  Beginning next year, USAID will have increased responsibility for executing its development and humanitarian assistance budget.  For FY 2013 and beyond USAID will develop a comprehensive budget proposal for its development and humanitarian assistance programs, which I will provide to the Secretary and which will be integrated into the joint State/USAID budget review.  BRM will work closely with F to coordinate these efforts.

With this increased responsibility will come increased accountability to use our budget as a tool to meet the challenges I described above:

As USAID missions and bureaus obtain increased flexibility in managing our budgets at the country level, we need to ensure streamlined, but accurate and timely, tracking and reporting of Administration and Congressional priorities, so that BRM and F can ensure funds are being used and can respond accurately to information requests from OMB, the Congress or other stakeholders.

Our comprehensive budget proposal must reflect strategic priorities at the corporate and country level and result in the increased focus of our resources on countries and programs critical to the achievement of the President's and Secretary's objectives.  This will require us to make difficult trade-offs, and to redeploy resources away from lower priority programs, and from activities that are not demonstrating meaningful results.

BRM will serve as the focal point of this effort.  Many of you already know Mike Casella, who I have asked to lead this new office.  Mike comes to USAID after a long career working with us on budget and management issues, most recently as the Branch Chief for International Economic Affairs at the Office of Management and Budget and as Acting Vice President for Administration and Finance at the Millennium Challenge Corporation.  As my Senior Advisor for Budget, Mike has already helped us put together our Haiti supplemental request and develop formal corporate-level recommendations for the FY 2012 budget process.

However, one office alone cannot rebuild USAID's budget capabilities.  That is why I have also asked Mike to form an Integrated Budget Team, consisting of BRM and USAID's budget officers in our bureaus and independent offices.  While these budget staff will continue to work in and support the bureaus and offices, they will also have a reporting relationship to Mike, similar to that between mission controllers and the Chief Financial Officer.  Through this approach, we will bring 35-40 dedicated professionals throughout the Agency, to implement our new budget responsibilities.

BRM will also work in close partnership with USAID's new Policy, Planning and Learning (PPL) Bureau.  Through this partnership, BRM and PPL will ensure that our budget supports our strategic priorities, and that USAID implements our programs along a seamless continuum that begins with corporate and country strategic plans, identifies the resources needed to achieve the goals we identify through these plans, and measures through rigorous performance monitoring and evaluation whether we have succeeded in doing so. 

I hope that you are as excited as I am that this corporate capability is now in place, and will give Mike and BRM your full support so that they can in turn support you by identifying the resources we need to become the global leader in development.

Rajiv Shah

Point of Contact:  Any questions concerning this notice may be directed to:  Mike Casella, BRM, at  ..

The Cable

Report: Baghdad Embassy misspent millions on phantom meals

The U.S. Embassy in Baghdad paid millions to a government contractor for meals and snacks that nobody ate, according to a new internal State Department report.

The State Department's Office of the Inspector General (OIG) found that the embassy overpaid by over $2 million, including over $1 million in snacks alone. The funds went to contractor KBR, the former subsidiary of Halliburton that runs food service for the over 1,500 employees of the world's largest embassy complex.

"KBR's headcount records from meals consumed do not match dining facility account records, and OIG was unable to reconcile the difference. These discrepancies suggest that in FY 2009 there were $2.23 million in unsupported food costs," the report stated.

A significant part of the discrepancy was due to how people are counted when they stop by what's called the "Grab-n-Go" snack stands at the embassy. This resulted in $970,000 dollars paid to KBR it didn't deserve, the report explained.

Partial blame lies with the embassy, according to the OIG. For example, the embassy staff encouraged employees to sign in every time they stopped by the snack areas, even if they were just picking up a cup of coffee or going back for an apple. As a result, "it was not uncommon to see 6-8 scans per individual for the same meal period. One person scanned his card 25 times in two days."

The embassy management office even put up signs around the embassy last year that read, "More scans = more goodies."

This practice resulted in inflated numbers being sent back to the contractor. The contractor would then prepare more food based on those numbers, resulting in higher overall costs to the embassy and the taxpayer.

The OIG criticized the embassy staff for encouraging this type of behavior. "OIG calculates the current embassy policy inflates the reported plate cost by 16 percent," the report said.

But the OIG did not entirely exonerate KBR of blame. Its report said that, while KBR provides a lot of data to the Defense Department, it isn't in a form the Pentagon can use. Therefore, there's no way to tell if contractor staffing levels are correct and finding instances of waste and fraud are more difficult.

The embassy responded to the OIG by saying that its description of how the Grab-n-Go stands work was "not completely accurate" and that the money paid to KBR is based on the amount of food eaten, not the number of scans. Responding to another of the OIG's criticisms -- that many non-authorized personnel were eating at the facilities -- the embassy said that it would not refuse a meal to any military or U.S. government employee.