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Pursuant to a congressional request, GAO reviewed the Agency for International Development's (AID) assistance projects in Russia, focusing on whether:
GAO found that:
GAO-NSIAD-95-156
USAID Projects in Russia
Abbreviations
ARC - American Russian Center, University of Alaska-Anchorage
BCG - Boston Consulting Group
CNFA - Citizens Network for Foreign Affairs
GKI - State Committee of the Russian Federation for the Management of State Property
IBTCI - International Business & Technical Consultants, Inc.
NIS - New Independent States
PADCO - Planning and Development Collaborative International
PIER - Partners in Economic Reform
PIET - Partners for International Education and Training
RCG-HB - RCG-Haggler Bailly
RPC - Russian Privatization Center
TVG - Tri Valley Growers
USAID - U.S. Agency for International Development
Letter
B-260365
August 3, 1995
The Honorable Benjamin Gilman
Chairman
The Honorable Lee Hamilton
Ranking Minority Member
Committee on International Relations
House of Representatives
The Honorable Sam Nunn
Ranking Minority Member
Permanent Subcommittee on Investigations
Committee on Governmental Affairs
United States Senate
This report responds to your request that we evaluate assistance projects in Russia managed by the U.S. Agency for International Development (USAID). Specifically, we determined whether (1) individual USAID projects were meeting their objectives and contributing to systemic reforms, (2) the projects had common characteristics that contributed to their successful or unsuccessful outcomes, and (3) USAID was adequately managing its projects in Russia. In conducting our study, we reviewed 10 judgmentally selected projects with obligations of $64.6 million as case studies and used audits and evaluations performed by the USAID Inspector General.
The United States began providing limited assistance to the Soviet Union in December 1990 to support the reform effort and then increased assistance after the Soviet Union dissolved in December 1991. In October 1992, the Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992 (P.L. 102-511), commonly known as the Freedom Support Act, was enacted. It further increased assistance to the former Soviet Union and established a multiagency approach for providing assistance. It also called for the designation of a coordinator within the Department of State whose responsibilities would include designing an assistance and economic strategy and ensuring program and policy coordination among federal agencies in carrying out the act's policies. The Freedom Support Act sets forth the broad policy outline for helping former Soviet Union countries implement both political and economic reforms. It also authorized a bilateral assistance program that is being implemented primarily by USAID. In January 1994, the State Department Coordinator approved the first overall U.S. assistance strategy for the former Soviet Union, and in May 1994, the Coordinator approved the strategy specifically for Russia. This strategy has three core objectives: (1) help the transition to a market economy, (2) support the transition to a democratic political system, and (3) ease the human cost associated with the transition. As of December 1994, USAID had obligated $1.4 billion and spent $539 million for programs and projects in Russia since fiscal year 1990.
USAID's assistance to Russia has focused on 13 sectors, such as health care and housing, that support the three U.S. objectives. Hundreds of U.S. contractors and grantees are responsible for implementing individual projects in the 13 sectors.
Projects have had mixed results in meeting their objectives. Some of the USAID projects we reviewed fully met most or all of their objectives, were contributing to systemic reform, and were sustainable. Others did not have all or some of these attributes of success.
The more successful projects had several characteristics in common: (1) all levels of the Russian government provided broad and strong support, (2) U.S. contractors had a long-term physical presence in Russia, and (3) these projects had a specific sustainability objective. Also, successful projects generally complemented or supported ongoing Russian initiatives. Projects that did not meet all their objectives lacked one or more of these characteristics, were poorly designed and implemented, and often had little or no impact on problems.
USAID did not adequately manage some projects it funded. The devolution of management and monitoring responsibility from USAID's Washington office to its Moscow office delayed decision-making and created confusion among contractors. Furthermore, USAID's management information systems were inadequate, and it did not adequately monitor or coordinate some projects. USAID has taken steps to overcome these problems, including terminating some unsuccessful projects, refining its assistance strategy, and undertaking efforts to improve project monitoring and evaluation.
In commenting on this report, USAID said that the difficult operating environment in which it worked during the first 2 years of the program in Russia cannot be overstated. We agree that USAID faced numerous operating obstacles in getting this program underway, and our observations on how well the projects performed should be seen in that context.
The 10 projects we reviewed showed mixed results in meeting their objectives.
Two projects, coal industry restructuring and housing sector reform, met or exceeded their objectives. Five projects, voucher privatization, officer resettlement, small business development, district heating, and agribusiness partnerships. met some but not other objectives.
Three projects, health care, commercial real estate, and environmental policy met few or none of their objectives.
1 The environmental policy project we reviewed was still in the early implementation phase. USAID awarded the initial contract in September 1993 to establish offices and technical support, but did not sign the agreements to implement the actual project work until April and September 1994. The projects will extend through September 1997.
Three of the 10 projects we examined were contributing significantly to systemic reform, that is, they were making fundamental structural changes. These projects were effecting change because they had sustainability--benefits that extend beyond the project's life span--built into their design and they focused on issues on a national or regional scale.
A project can contribute to systemic reform without meeting all of its objectives. Two projects, coal industry and housing sector reform, contributed to systemic reform and met their objectives. The privatization project contributed to systemic reform but did not meet all its objectives.
The housing sector project helped Russian ministries and agencies implement 38 laws, regulations, and decrees to reform housing policies and practices. The Urban Institute, which implemented the project, also completed a series of pilot projects related to housing maintenance, mortgage lending, rent reform, and property rights. Many of the activities affect the entire country or could be replicated in additional cities. The project helped create new institutions, strengthened existing ones, and distributed procedural guides and manuals to local governments as a way to sustain the reforms.
The contract for implementing the voucher privatization project called for Deloitte & Touche to establish 35 voucher clearing centers in cities throughout Russia. This project encountered some difficulty in meeting its initial time frames and establishing all the centers, but overall the project was successful. The active centers handled 70 million voucher transactions as part of Russia's unprecedented privatization program, and over half the centers participate in ongoing capital market activities.
Partners in Economic Reform (PIER), which implemented the coal restructuring project, has facilitated movement toward the transformation of the entire coal sector. PIER helped build a consensus for reform among the Russian government, mine labor unions, and mine management. It was also instrumental in facilitating a World Bank review that could lead to a restructuring loan. To sustain the project's contribution to systemic reform, PIER helped establish long-term business relations between the Russian and U.S. coal industries, formed a consortium of U.S. coal-related business, and is involved in social safety net and new job-creation activities. Finally, PIER helped facilitate the sale of U.S. equipment in Russia.
Seven projects we examined did not contribute significantly to systemic reform because they either did not meet their objectives, were narrowly focused, or lacked sustainability.
The University of Alaska sought to help develop small businesses by establishing American Russian Centers in four cities across the Russian Far East. The centers' purpose was to help train entrepreneurs, help form new businesses, and build lasting business ties between the region and the United States. To become self-supporting after USAID stopped funding, the centers planned to develop partnerships with counterpart institutions. However, the centers have so far been unable to attract alternative funding.
CH2M Hill International Services, Inc., signed a contract in September 1993 for an environmental policy development and technology project. The contractor had difficulty filling critical staff positions in Russia and providing required work plans for the activities. Of the work plans due in November 1994, one was approved in May 1995, while the other was still being revised as of June 1995.
The project to provide health care financing training in the United States to Russian health professionals was implemented by Partners for International Education and Training (PIET), several training institutions, and USAID. Although PIET and the institutions provided the training as required, the Russian participants did not have the authority, expertise, or resources to make systemic changes. In addition, changes in Russia's health reform plans have made the training irrelevant.
A commercial real estate project, implemented by International Business & Technical Consultants, Inc. (IBTCI), was intended to create a standard approach for increasing the availability of commercial real estate in six Russian cities. The project design called for a pilot project] roll-out concept, but IBTCI did not roll out the pilot in any of the cities and used a different approach in each city. Also, Russian officials said the project had little or no effect on the availability of commercial real estate in their cities.
The district heating project, which USAID recommended we review, was implemented by RCG-Haggler Bailly and met its objectives primarily by conducting energy audits and training as well as providing energy efficiency equipment to two Russian cities. However, as of February 1995, some of the equipment in one of the cities had not been installed. Russian officials said the equipment may never be installed because Russian authorities never certified it. USAID had not monitored the use of the equipment or followed up on the impact of the studies produced for the project. Consequently, we found no indication that the project contributed to systemic reform in the energy efficiency area.
The agribusiness partnerships project, implemented by Tri Valley Growers, helped two U.S. companies establish joint ventures in two Russian cities. Although the involvement of U.S. companies increased the probability that the business ventures would be sustained, the limited scope of the partnerships makes it unlikely that they will have a significant effect on reforming Russia's agricultural sector. USAID has discontinued the entire agribusiness partnerships project in Russia. OFFICER RESETTLEMENT PILOT PROJECT
The Russian officer resettlement pilot project was not intended to be sustainable after its completion, but instead was motivated by the United States' desire to encourage the withdrawal of Russian troops from the Baltic countries. The $6-million pilot project objective was to construct 450 housing units to resettle demobilized officers by July 1994. As of February 1995, 422 units were either occupied or available for use, so in that sense the project was successful.
The Baltic countries are Latvia, Lithuania, and Estonia. The United States never officially recognized them as part of the former Soviet Union.
Successful projects (1) had strong support and involvement at all levels of the Russian government, (2) had a long-term physical presence by U.S. contractors in Russia, and (3) were designed to achieve maximum results by supporting Russian initiatives, having a broad scope, and including elements that made them sustainable. A critical element to a project's success was the degree to which Russian officials were committed to reform in the particular sector.
Russians at both the federal and local levels demonstrated a strong commitment to the projects that were contributing to systemic reform. The Russian government also provided financial or in-kind support, and Russian nationals held leadership roles in the projects. For example, PIER's approach to implementing the coal project included working with officials in the Ministry of Fuel and Energy, Fund of Social Guarantees, and the federal coal company; academic institutions; oblast' and city officials in the two targeted regions; local mine management; and representatives of two labor unions. Russian nationals served as codirectors, and PIER staff received free apartments and office space.
To accomplish the housing sector reform project, the Urban Institute worked closely with officials in the Ministries of Finance and Economy and the State Committee on Architecture and Construction at the federal level, the Moscow city government, various maintenance firms, banks, and grass-roots condominium associations. Although office space in Moscow is expensive and scarce, the Institute received free office space. In addition, Russian nationals played a key role on the Institute's staff.
In contrast, many less successful projects lacked the buy-in of Russians at either the local or federal level and had little Russian involvement or contribution. For example, the State Committee of the Russian Federation for the Management of State Property (GKI), Russia's federal agency overseeing the privatization effort, was instrumental in designing the voucher clearing and commercial real estate projects. However, in some cities, local officials were not involved in designing the projects and had little interest in them; as a result, these projects were not fully successful.
The officer resettlement project established housing in several cities, but not in Novosibirsk, where city officials reneged on a previous administration's commitment to provide needed infrastructure support. Because officials at the federal and oblast' levels were not involved in the initial agreements, they had no authority to require the new city administration to fulfill the contract, nor were they willing to provide additional funding for the project.
The district heating project was not completed in Yekaterinburg because local officials did not allow monitoring equipment to be installed. They said the proper Russian authorities had not certified the equipment.
Oblasts, krays, and republics are regional administrative units similar to states in the United States.
GKI is a Russian acronym.
The successful projects usually had long-term advisers living in Russia, which enabled the advisers to build trust, learn about local conditions and plan accordingly, monitor progress closely, and correct problems as they occurred. In addition, successful projects involved contractors that had appropriate experience to carry out the project. For example, the Urban Institute has had two long-term advisers living in Moscow since 1992 who maintained close contact with Russians involved in housing reforms. PIER's project director had lived in Moscow for 3 years. Other members of its American staff had lived in Kemerovo and Vorkuta, the key cities of the major coal mining oblasts, since 1993 and 1994, respectively. The two field staff have years of experience as coal mine engineers. Russian officials at all levels (1) praised PIER's staff; (2) described PIER's assistance as timely, well-targeted, and beneficial; and (3) wanted the project to continue and expand. Contractors implementing many of the less successful projects did not have staff living in the Russian cities being assisted. For example, neither IBTCI nor RCG-Haggler Bailly had permanently assigned American staff in the cities being assisted. IBTCI's consultants would fly in, make rapid diagnoses, deal with problems quickly, and then leave. Many U.S. officials, Russians, and contractors said that relying on "fly-through" consultants rather than permanent staff was an ineffective approach.
Successful projects, the housing reform, voucher privatization, and coal industry restructuring--were designed to be sustainable, have a widespread effect, and support existing initiatives. Each project supported ongoing Russian efforts at widespread reform, considered local conditions, and contained elements to sustain the effects of the project beyond its life span.
In contrast, some projects were not designed to maximize their potential impact. For example, the project design required RCG-Haggler Bailly to provide energy efficiency equipment and audits but did not include methods to replicate the project in other cities, or extend monitoring efforts to determine how the equipment or studies were used. The USAID Inspector General reported that other projects did not include any follow-up steps to ensure that the assistance provided was used. In addition, projects focusing on health care training and commercial real estate leasing did not consider local needs and conditions and thus had limited impact.
Several projects did not adequately identify outcomes or measurable results. For example, the Tri Valley Growers' contract with USAID did not stipulate how many agribusiness partnerships were to be established. The design of the coal project also did not adequately identify outcomes or measurable results, but PIER developed an effective project nonetheless. The USAID Inspector General found similar problems when reviewing many projects in the region.
Audit of the Bureau for Europe's Technical Assistance Contracts (Report No. 8-180-93-05, June 30, 1993); Audit of the Distribution of Emergency Medical Supplies to the New Independent States Under USAID Cooperative Agreement With the People-to-People Health Foundation "Project Hope" (Report No. 8-110-94-006, Mar. 17, 1994); and Audit of Activities to Improve Crop Storage Systems in the New Independent States (Report No. 8-110-94-014, Aug. 31, 1994).
Audit of the Bureau for Europe's Technical Assistance Contracts Report No. 8-180-93-05, June 30, 1993; Audit of the ENI Bureau's Monitoring, Reporting and Evaluation System (Report No. 8-000-95-002, Nov. 28, 1994); and Audit of Selected Privatization and Restructuring Activities in Russia (Report No. 8-118-95-007, Mar. 10, 1995).
It is widely acknowledged that the Russian people themselves will determine the ultimate success or failure of political and economic reforms. Without their involvement and commitment to change, outside assistance will have a limited effect. For example, the support and involvement of Russian federal agencies, such as GKI in the privatization effort and the ministries related to housing, ensure that projects in those sectors are likely to have a wide and sustained effect. The coal project's impact depends on Russia's commitment to restructure the coal industry. In several sectors, a Russian commitment to reform remains elusive. Powerful factions in the Russian legislative branch strongly oppose land reform, and the Ministry of Health has not demonstrated a commitment to health care reform. This lack of commitment raises concerns that projects in the agriculture and health sectors will not have widespread benefits. USAID is now working with the Ministry of Environmental Protection and Natural Resources, but the level of support from other important federal ministries, including the Ministry of Finance, is still questionable. Other domestic conditions will also influence a project's success. Russia's commitment to breaking up monopolies and its ability to attract capital for modernizing outdated equipment, restructuring existing state enterprises, and starting new businesses will affect the pace and scope of Russia's transformation to a market economy. Moreover, projects such as introducing mortgage lending will depend on macroeconomic policy and land reforms. Russia is counting on foreign capital to help move the transition process forward, but such factors as the unstable economic situation, a poor and uncertain tax structure, an undeveloped financial market infrastructure, and an increased crime rate make foreign investors hesitant to invest.
USAID responded quickly to assist Russia in undertaking its political and economic reforms, as called for in the Freedom Support Act. However, to respond quickly, USAID made certain exceptions to its normal procedures and processes. Although USAID provided a quick and flexible response to a fluid, unpredictable situation, we identified several management problems in addition to design problems that occurred, in part, because of the quick response. USAID officials agreed that management problems occurred, but they said the risks associated with not responding quickly were high.
Congress granted USAID special authority to provide a quick response. Section 201 of the Freedom Support Act of 1992 amended the Foreign Assistance Act by adding chapter 11, section 498B, that waived provisions of law in providing assistance to the former Soviet Union.
The large size of USAID's program, the vast geographic area receiving assistance, and staff limitations have prevented adequate monitoring in some cases. We found that USAID officials were unaware of positive and negative aspects of the projects implemented by IBTCI, RCG-Haggler Bailly, and PIER. USAID officials had not visited some projects, and USAID did not have representatives located outside Moscow. USAID expected its Russian staff to conduct field monitoring, but the Russian nationals lacked the necessary training. USAID officials said they considered but rejected the idea of establishing field offices outside Moscow.
Without adequate staff, USAID relied mainly on contractors' written and oral reports to monitor the projects, but some contractors did not report all problems. The USAID Inspector General also found shortcomings in the reporting process: contractors were not required to report on their progress toward specific objectives or indicators.
Moreover, USAID did not enforce some of its reporting requirements. For example, Deloitte & Touche did not provide the required lists of equipment purchased with USAID funds and brought into the country, and USAID did not enforce the requirement.
Although the State Department allowed USAID-Moscow to increase U.S. direct-hire personnel and personal services contractors from 27 in fiscal year 1993 to 66 in fiscal year 1995, USAID officials said even more staff were needed to adequately monitor the program. However, State would not allow the USAID mission to grow further because, among other reasons, the USAID assistance program is scheduled to end by the end of the decade.
In some cases, USAID had not determined the relative success or failure of projects so that it could apply lessons learned to other efforts. It did not conduct the required periodic assessments evaluations of the coal and agribusiness projects. The omnibus contracts\10 do not require an evaluation of the individual tasks, but instead evaluations are to be done at the end of the contracts, according to USAID officials. The omnibus contracts for USAID's private sector initiatives alone have obligated approximately $200 million and are not scheduled to terminate until 1996, too late to apply lessons learned. In addition, an evaluation that was conducted was not accurate. A contractor evaluated the district heating project in June 1993 and gave it high marks. Our 1995 review of the project found major shortcomings, such as equipment still in boxes after being delivered in 1993, even though the evaluation report said the equipment had been installed and was being used. The USAID Inspector General also found that evaluations had not been conducted and that the quality and impact of some project evaluations were questionable.
Audit of Selected Privatization and Restructuring Activities in Russia (Report No. 8-118-95-007, Mar. 10, 1995) and Audit of the Distribution of Emergency Medical Supplies to the New Independent States Under USAID Cooperative Agreement With the People-to-People Health Foundation "Project Hope" (Report No. 8-110-94-006, Mar. 17, 1994).
USAID's Europe and the New Independent States Bureau often procured U.S. technical assistance through multipurpose contracts, commonly referred to as "omnibus" contracts. These contracts provided for the performance of activities, many of which needed to be further defined. USAID used the omnibus contracts to retain the services of U.S. companies to mobilize, either in-house or through subcontractors, the resources and expertise needed to identify and implement project activities. The description of work in these contracts was very general, but required subsequent development of "task orders" and "work plans" to further define the activities the contractor was to perform.
Audit of the ENI Bureau's Cooperative Agreement With World Learning, Inc. for Support to Non-Governmental Organizations in the New Independent States of the Former Soviet Union (Report No. 8-110-95-008, Mar. 10, 1995).
The devolution of management and monitoring responsibility from USAID's Washington office to a rapidly growing Moscow office has not been smooth, and several problems have developed as a result. First, as USAID's Moscow office assumed more management responsibility, contractors had to begin dealing with another layer of management review. This caused delays and confusion among some contractors. Second, there were tensions between the Washington and Moscow offices because of differences regarding program implementation. For example, the offices disagreed about which reformers and Russian government agencies to work with. Third, the USAIDMoscow office lacked some essential documents to enable officials to carry out their duties. We found that key contract and financial documents were not available in Moscow, a problem also reported by the USAID Inspector General.
The State Department Coordinator opposed giving greater authority to USAID-Moscow because he believed USAID-Washington needed to maintain a more prominent role. He said that because assistance to Russia is an important foreign policy issue, key decisions should not be delegated to the field. State and USAID-Washington officials said they needed quick access to important project data for reporting purposes, but quick access to data could not be ensured when projects were managed by the USAID-Moscow office.
Audit of the Bureau of Europe's Technical Assistance Contracts (Report No. 8-180-93-05, June 30, 1993) and Audit of the ENI Bureau's Monitoring, Reporting and Evaluation System (Report No. 8-000-95-002, Nov. 28, 1994).
USAID has not yet developed a good management information system for its Russia program. The USAID Inspector General reported that USAID lacked an information system with baseline data, targets, time frames, and quantifiable indicators by which to measure program progress and results. USAID's Bureau for Europe and the New Independent States was exempted from a new agencywide management system because the program was intended to be short term and regional rather than long term and country-specific. USAID officials said the pressure to provide assistance quickly meant forgoing the traditional project design process, which included developing progress indicators.
Audit of the ENI Bureau's Monitoring, Reporting and Evaluation System (Report No. 8-000-95-002, Nov. 28, 1994).
Part of USAID's assistance strategies was to focus on areas where reformers were willing to make changes. USAID believed this would help create a synergy that could stimulate the overall impact of the projects.
Some contractors were not aware of each others' activities. USAID's management information system did not list contractors by region, and USAID sometimes did not tell new contractors about other contractors' activities. In some cities, contractors contacted each other on their own and started coordinating their efforts. However, this was being done on an ad hoc basis. In Vladivostok and Yekaterinburg, U.S. Consuls General facilitated contractor coordination. The USAID Inspector General found that many projects with similar goals were not linked to one another. Poor coordination reduced the opportunity to achieve synergy and targeted impact and gave some Russians the impression U.S. assistance was fragmented and uncoordinated.
Audit of ENI's Strategy for Managing Its Privatization and Restructuring Activities in Russia (Report No. 8-118-95-009, Mar. 17, 1995).
The Russian government has no agency to coordinate assistance efforts within the country.
We recommend that the USAID Administrator focus assistance efforts on projects that (1) will contribute to systemic reforms; (2) are designed to be sustainable; (3) are supported by all levels of Russian government; and (4) whenever possible, use American contractors with an in-country presence.
In commenting on a draft of this report, USAID said the three projects that we had deemed to have not met their primary objectives did produce some positive benefits or it was too early to tell the impact the projects would have. USAID also said it was aware of the problems that have occurred and has taken steps to correct them or terminate activities that could not be fixed. USAID pointed to a new computerized monitoring system that is expected to produce its first report in November 1995.
USAID agreed with our recommendation regarding the focus of its assistance projects and said it was taking steps to implement it. In addition, USAID said it was taking corrective action to address the management problems we identified. However, it stressed that its assistance has had a positive impact and occurred in a difficult operating environment. USAID indicated that it had made progress in setting up its own monitoring, reporting, and evaluation system. It should be pointed out, however, that in November 1994, the USAID Inspector General reported that the system was still far from able to measure program results.
USAID said that our report would have provided a more balanced and accurate view of the systemic impact and sustainability of a project's activities if we had considered the activity in the context of the whole program. USAID stated that, in nearly every case, the individual projects we focused on were part of a larger project or program that would have substantial impact on reforming Russia's economy. USAID is correct that the projects we examined were usually one component of a larger sector program; however, USAID is incorrect in its assertion that we evaluated projects in isolation and without considering the context of the whole program. The overriding objective of USAID's program in Russia is to contribute to reforming both the political and economic systems. This is also the objective of the assistance program for each sector and, with few exceptions, of each project that supports a sector program. Our examination focused on the individual building blocks that support sector programs and ultimately support the reform effort in Russia. In some cases, we found that the individual building blocks will not contribute to systemic reform in the sector or in Russia overall. Even though this does not mean that an entire program, of which a less-than-successful project is a part, will fail in its systemic reform objective, it does mean that an unsuccessful project is not contributing to a program's success.
We also disagree with USAID's assertion that significant systemic reform has resulted from USAID activities in all sectors. For example, the agribusiness partnerships project, including components reviewed by the USAID Inspector General, comprises most of the USAID funding going to the sector but is not expected to contribute significantly to systemic reforms. Only a limited degree of systemic reform has occurred in other sectors as well, including the health care and the environmental sectors. We believe that a sector evaluation, although useful in its own right, would not have allowed us to draw conclusions about the role and contribution of individual projects.
USAID provided other comments that we incorporated into the report where appropriate. The full text of USAID's comments is reprinted in appendix IV.
Audit of the ENI Bureau's Monitoring, Reporting and Evaluation System (Report No. 8-000-95-002, Nov. 28, 1994).
We judgmentally selected 10 individual projects from 6 sectors to review as case studies. We selected projects based on their geographic distribution, focusing on regions where several projects were concentrated. We also considered the level of obligations and expenditures; the type of assistance provided (e.g., training, technical assistance, and product delivery); and the type of contracting vehicle (e.g., cooperative agreements, grants, and contracts). We generally did not review projects examined by the USAID Inspector General, although we analyzed its work to assess whether common themes emerged. (See app. II for a list of the 10 projects we studied and USAID Inspector General reports we reviewed.)
We analyzed USAID and project documents and interviewed USAID and other U.S. government officials, U.S. contractors, Russian counterparts, and beneficiaries. We visited project sites in Western Russia, Siberia, and the Russian Far East in November 1994 and February 1995.
Appendix III provides a detailed analysis of the 10 projects in our case study.
We conducted our work from September 1994 to April 1995 in accordance with generally accepted government auditing standards.
As agreed with your offices, unless you publicly announce this report's contents earlier, we plan no further distribution of this report until 30 days after its issue date. At that time, we will send copies to the Secretary of State, the Administrator of USAID, and other interested congressional committees. Copies will also be made available to others on request.
Please contact me at (202) 512-4128 if you or your staff have any questions concerning this report. Major contributors to this report are listed in appendix V.
Harold J. Johnson, Director International Affairs Issues
In his January 1995 annual report, the State Department Coordinator reported about $2.9 billion in obligations and $1.8 billion in expenditures for Russia through December 1994. (See table I.1.) Between fiscal years 1990 and 1994, the U.S. Agency for International Development (USAID) allocated assistance to the New Independent States (NIS) as a region. During that time, most projects spanned different countries and USAID did not track how much money was obligated or expended by country. Thus, USAID country attributions are estimates and should be treated as such. In fiscal year 1995, USAID began keeping country accounts.
Table I.1
Obligations and Expenditures for Assistance to Russia (Fiscal Years 1990 through 1994)
(Dollars in millions)
| Agency |
Obligations |
USAID direct Expenditures |
| $1,230.0 | $440.4 | |
| USAID transfers and allocations to other agencies | 171.1 | 98.1 |
| USAID subtotal | 1,401.1 | 538.5 |
| Department of Defense | 291.0 | 72.9 |
| Department of Agriculture | 1,192.0 | 1,192.0 |
| Total | $2,884.1 | $1,803.4 |
Source: Department of State.
We reviewed 10 projects in depth as part of our review. In addition, we reviewed various reports that USAID's Inspector General has issued on management issues and projects in Central and East Europe and the former Soviet Union. The 10 projects and the USAID Inspector General reports we reviewed are listed in table II.1.
Table II.1
Projects GAO Reviewed
(Dollars in millions)
Start End
Project-implementing partner date date Obligations
Housing policy reform-Urban Sept. Aug. $5.8
Institute 92 94
Voucher privatization Feb. June 4.1
Deloitte & Touche 93 94
Coal project-Partners in June Aug. 8.0\a
Economic Reform 92 95
Small business development Apr. May 95 5.1
American Russian Center, 93
University of Alaska
Environmental policy & Apr. Sept. 26.4\b
technology 94 97
CH2M Hill International Services
District heating-RCG Haggler Feb. Dec. 1.3
Bailly 92 93
Health care training-Partners Fall Fall 0.7
for International Education 93 93
and Training
Commercial real estate Oct. Dec. 2.0
International Business & 93 94
Technical Consultants, Inc.
Agribusiness partnerships-ri Feb. Sept. 5.2\a
Valley Growers 93 97\c
Russian officer resettlement July July 6.0
Planning and Development 93 94\e
Collaborative International
$64.6
Note: Obligations are as of March 1995.
a Amount could be applied to other countries in the NIS as well as Russia.
b Total estimated amount of three contracts.
c USAID stopped accepting proposals for partnerships in Russia in September 1994.
d Primary implementing partner.
e Project had not been completed as of April 1995.
The following are the USAID Inspector General reports GAO reviewed.
Audit of the Bureau for Europe's Technical Assistance Contracts (Report No. 8-180-93-05, June 30, 1993).
Audit of the ENI Bureau's Monitoring, Reporting and Evaluation System (Report No. 8-000-95-002, Nov. 28, 1994).
Audit of ENI's Strategy for Managing Its Privatization and Restructuring Activities in Russia (Report No. 8-118-95-009, Mar. 17, 1995).
Audit of Selected Privatization and Restructuring Activities in Russia (Report No. 8-118-95-007, Mar. 10, 1995).
Audit of the Reestablishment of Vaccine Production Activity Under the New Independent States Health Care Improvement Project No. 110-0004 (Report No. 8-110-94-004, Feb. 25, 1994).
Audit of the Medical Partnerships in Russia and Health Information Clearing House Activities Under the New Independent States Health Care Improvement Project (Report No. 8-110-94-005, Feb. 28, 1994).
Audit of the Distribution of Emergency Medical Supplies to the New Independent States Under USAID Cooperative Agreement With the People-to-People Health Foundation "Project Hope" (Report No. 8-110-94-006, Mar. 17, 1994).
Audit of the Vulnerable Groups Assistance Program in Russia Under Project No. 8-110-0001 (Report No. 8-110-93-08, Sept. 24, 1993).
Audit of Activities to Improve Crop Storage Systems in the New Independent States (Report No. 8-110-94-014, Aug. 31, 1994).
Audit of the ENI Bureau's Cooperative Agreement With World Learning, Inc., for Support to Non-Governmental Organizations in the New Independent States of the Former Soviet Union (Report No. 8-110-95-008, Mar. 10, 1995).
Audit of the Department of Commerce's Special American Business Internship Training Program in the New Independent States (Report No. 8-110-93-10, Sept. 24, 1993).
Audit of the Department of Commerce's Consortia of American Businesses in the New Independent States Program (Report No. 8-110-93-11, Sept. 24, 1993).
Audit of the Nuclear Regulatory Commission's Technical Assistance Activities in Russia (Report No. 8-118-94-012, June 28, 1994).
Audit of the Department of Energy's Nuclear Safety Technical Assistance Activities in Russia and Ukraine (Report No. 8-110-95-001, Oct. 7, 1994).
The following provides a detailed analysis of each project that we reviewed.
We selected one project in each of the following areas: (1) housing policy
reform, (2) voucher privatization, (3) coal, (4) small business development,
(5) environmental policy and technology, (6) heating, (7) health care,
(8) commercial real estate, (9) agribusiness partnerships, and (10) officer
resettlement. Each summary contains information on the problems in the
sector, USAID's project objectives for the selected contract, and the project
approach used by USAID or the contractor. We also provide our assessment
of the contractor's performance, the impact on systemic reform, and USAID's
management of the contract. The projects are presented on the basis of
their capacity to contribute to systemic reform.
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Date last Revised: September 10, 1997