Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
OPERATING EXPENSES
FY 1997 FY 1998 FY 1999 Actual Estimate Request Operating Expenses $488,250,000 See footnote 1 $478,858,000 See footnote 2 $483,858,000 See footnote 3
For FY 1999, USAID is requesting $483,858,000 in Operating Expenses (OE). These funds, 1combined with other funding sources, such as local currency trust funds, will provide a total of $541,832,000 to cover operating costs of the agency for FY 1999, compared to $557,136,000 in FY 1998. These levels for FY 1998 and FY 1999 include $9 million and $0.5 million, respectively, for one-time costs associated with real property overseas. Adjusting for these one-time costs, the requested agency operating budget for FY 1999 represents a reduction of $6.8 million from FY 1998.
At the FY 1999 OE request level, USAID anticipates an on-board U.S. direct-hire (OE funded) staffing level of 2,232, which is 15 below the estimated FY 1998 level of 2,247, notwithstanding planned increases in program funding. Total OE-funded workforce levels, including foreign national employees and U.S. personal service contractors, will drop from a level of 5,792 in FY 1998 to 5,549 in FY 1999. These personnel are responsible for managing a USAID-administered program (Development Assistance, P.L. 480 Food for Peace, Economic Support Fund, Support for Eastern European Democracies, FREEDOM Support Act programs in the New Independent States, and other accounts) of about $5.6 billion, excluding the cash grant to Israel. As the OE budget of the agency is, in effect, the agency's overhead, this translates to an overhead rate of only 8.7%. A breakout of staffing by organizational unit, headquarters and overseas, will be provided separately.
Since FY 1993, the beginning of the Clinton Administration, through the end of FY 1997, USAID closed 28 missions, producing cumulative OE savings through FY 1999 estimated at $218 million. Absent these closings, the agency's OE requirements for FY 1999 alone would be about $151 million higher than is currently being requested. Other past and future actions to reduce costs and improve efficiency are discussed in the management overview section of this document.
Year 2000 Program. USAID is aggressively pursuing a Year 2000 program which has as its objective preparing all corporate mission-critical information systems for the millennium change. The 1997assessment of USAID's information systems assets revealed that virtually all corporate “legacy” systems which support key administrative operations (information systems which have been in operation for decades in some cases) require modifications in order to operate properly after the change in century. In addition, the assessment revealed that the new management system requires some modifications to accommodate next-century dates. Like many Federal agencies, USAID's computer systems hardware and telecommunications infrastructure also require upgrades in order for these components to be year 2000-compliant. USAID is giving top priority to repair of its technical infrastructure and to those mission-critical systems upon which continued operation of the agency depends, with all other year 2000 activities receiving second priority. Mission-critical systems receiving first priority are those which process agency payroll, essential human resources-related systems which provide control of personnel resources, funds management systems which track expenditures and allow payment of invoices and systems which control loans and grants originating with USAID.
USAID plans to cancel or delay competing activities in order to provide sufficient resources to the year 2000 effort. Considering the short time-frame within which year 2000 repairs must be made, it is possible that not all agency systems will be repaired in time. USAID intends to eliminate or replace old systems where possible and prepare contingency plans in the event that year 2000 changes are not completed on time.
USAID intends to comply with the guidelines published by the Office of Management and Budget regarding the schedule to complete renovation, testing and implementation of renovated systems. Decisions regarding the future course of the new management system will impact upon USAID's ability to meet this target schedule. Should projected schedules exceed the OMB guidance, additional attention will be focused upon production and implementation of contingency plans to accommodate the increased level of risk.
Projected Year 2000 Expenditures by Category ($000):
Year Hardware and Telecommunications Software 1998 8,651.3 7,700.0 1999 9,501.4 1,900.0
New Management System. In November 1997, USAID contracted with the General Services Administration for an independent review of the new management system (NMS). Of special concern in this review is determining the lowest risk, lowest cost approach among several alternatives to correct identified problems with the NMS that can be implemented within the time remaining before the year 2000. The reviewed approaches include modifying existing NMS software, replacing some or all the existing software with commercial off-the-shelf (COTS) modules and cross-servicing arrangements involving the provision of financial support services by another organization on a reimbursable basis. USAID is in the process of evaluating the recommended alternatives to determine which approach to use.
The approach finally accepted by USAID will satisfy the following requirements:
* It will be within planned FY 1998 and FY 1999 information technology budget levels.
* It will be within the organizational and skill capacity of USAID to successfully implement.
* It will be year 2000 compliant.
* It will be phased in and substantially completed before March 1999, with full implementation no later than October 1, 1999.
* It will achieve the highest degree of technical stability.
* It will be compliant with federal regulations and guidelines for internal controls, security and financial management.
Once the approach has been validated, USAID will prepare an investment plan, and share it with the Congressional oversight committees.
USAID will be realigning its information technology budget to assure critical operations without interruption through the year 2000. Due to the timing of deliverables under the current ongoing independent review of NMS, data provided on NMS costs are best estimates and are subject to change after staff analysis of the report is complete.
USAID suspended development in the NMS in October 1997 and has focused its efforts on correcting NMS deficiencies and addressing vulnerabilities. USAID has implemented substantial reductions in existing contractor workforce levels working on the NMS in order to conserve funds needed to implement improvements to the system. USAID is providing the following budget estimates for the NMS based on previously planned funding levels that will be updated and communicated to Congressional committees on Appropriations in March 1998.
New Management System Estimated Funding Levels ($000):
FY 1998 FY 1999 AID Worldwide Accounting 8,886.7 4,463.0 and Control System (AWACS) Acquisition and Assistance 762.0 240.0 Operation 1,082.0 840.0 Budget 762.0 750.0 Property 451.0 850.0 NMS Infrastructure and Support 8,118.8 6,577.3 Total 20,062.5 13,720.3
In an effort to provide improved cost control and accountability, USAID has consolidated all NMS budget components within its Information Resources Management office. Prior to this being done, USAID reported budget estimates to Congress early in FY 1998 for the NMS that were understated by $5.4 million in FY 1998 and $2.16 million in FY 1999. The figures reported above reflect consolidated budget estimates pending the outcome of the independent review process.
Sources of Funding for Operating Expense Costs. The operating costs of USAID are financed through several sources, including new budget authority, local currency trust funds, reimbursements for services provided to other accounts, recoveries of prior year obligations, and unobligated balances carried forward from prior year availabilities. A chart showing the sources of funds for operating expense costs for FY 1997 through FY 1999 is provided on the following page.
Funding Sources for Operating Expenses
($000)
FY 1997 FY 1998 FY 1999 Category Actual Estimate Request Appropriated Operating Expenses 488,250 See footnote 4 478,858 See footnote 5 483,858 Program Funds Used for OE 150 75 75 End of Year Balance - Expired Funds - 519 0 0 Obligations from New Budget Authority 487,571 478,933 483,933 Local Currency Trust Funds (Recurring) 36,361 39,267 35,221 Local Currency Trust Funds (Real Property) 6,120 9,004 472 Reimbursements 5,675 5,500 4,500 Unobligated Balance, Start of Year 39,935 32,138 18,906 Recovery of Prior Year Obligations (Sec. 509) 12,044 10,000 10,000 Unobligated Balance, End of Year - 32,138 - 18,906 - 10,000 Obligations from Other Funding Sources 67,998 77,003 59,099 Total Obligations 555,868 557,936 543,032
Uses of the OE Budget. The major OE cost components, required to support planned staffing levels, are as follows:
* Of $541.8 million planned for operating costs in FY 1999, $302.7 million, or 56%, is for employee salaries and benefits (object class codes 11.1 through 12.1) -- U.S. direct hire, U.S. personal service contractors, and foreign national employees. The FY 1999 cost is $10.3 million higher than FY 1998, in spite of lower workforce levels, reflecting the impact of Federal pay raises, pay raises for foreign national employees, and the impact of those pay raises on benefits such as the agency share of retirement costs and hardship differential.
* Travel and transportation costs (object class codes 21.0 and 22.0) will be about the same in FY 1999 as in FY 1998. These costs, $35.1 million in FY 1999, or 6.5% of the total operating costs of the Agency, include mandatory and statutory requirements, ($17.2 million of the $35.1 million) such as costs associated with post assignment, home leave, rest and recuperation, and educational travel, as well as operational and training-related travel and transportation costs.
* Rents, communications, and utilities will cost $71.9 million in FY 1999 (13.3% of the total budget) - an increase of $1.6 million over FY 1998. Included in this category are residential and office rental and utility costs worldwide as well as communications costs worldwide. The increase from FY 1998 to FY 1999 is primarily related to rental charges levied by the General Services Administration for office space in the Ronald Reagan Building.
* Other services, at $55 million in FY 1999 (10% of the total budget), reflect a reduction of about $9.2 million from FY 1998. The majority of these costs, and the area in which costs
will decline, is related to automation, and reflects the fact that while work under the various contracts will continue into FY 1999, most obligations for work associated with year 2000 and the NMS will have been recorded in FY 1998.
* Purchase of goods and services from other government accounts, primarily for overseas administrative support provided through the International Cooperative Administrative Support Service (ICASS) program, will cost $26.4 million in FY 1999 (5% of the total budget), about the same as in FY 1998. Costs will increase slightly in some categories of services due to inflation, to be offset by the fact that funding for Defense Contracting Audit Agency (DCAA) audits, previously funded from the OE budget, will be funded from the appropriation for Operating Expenses of the Inspector General beginning in FY 1999.
* Operation and maintenance of facilities and equipment and storage of goods (object class 25.4 and 25.7) will cost about $21.4 million in FY 1999, about the same as in FY 1998. These object classes include costs for the operation and maintenance of telephone systems, the mainframe computer, storage of household goods of U.S. direct-hire staff located overseas, and maintenance of office and residential furniture and equipment.
* Equipment purchases, including office and residential furniture and equipment as well as automation hardware and software, will cost about $16.7 million in FY 1999, a reduction of $3.8 million from FY 1998 levels. Most of the reduction is in the area of automation hardware and software, reflecting plans to begin replacing hardware and software in FY 1998 in preparation for year 2000.
* Land and structures, funds used for the purchase or construction of real property overseas as well as renovations and alterations to real property, both overseas and in Washington, will require about $2.1 million in FY 1999, a reduction of $9.8 million from FY 1998. The reduction is primarily related to the new office building in Cairo, Egypt, for which most funding will be in place by the end of FY 1998.
A chart showing OE and trust fund allocations, as well as workforce levels by organizational unit, will be provided separately.
A chart showing preliminary plans for the use of funds by object class, split between costs associated with headquarters operations and those associated with overseas operations, is provided on the following pages.
Footnote: 1 Includes $470,750,000 of New Budget Authority and $17,500,000 transferred from the Development Assistance Account. Excludes $42,784,700 in local currency trust funds, $39,935,600 carried forward from prior year funds, $5,675,200 in reimbursements, and $150,000 in program funds used for travel related to the environmental activities.
Footnote: 2 Includes $473,000,000 in New Budget Authority and $5,858,000 transferred from the Department of State for costs associated with administrative support provided via International Cooperative Administrative Support Services (ICASS). Excludes $48,270,800 in local currency trust funds, $31,551,500 carried forward from prior year funds, $5,500,000 in estimated reimbursements, and $75,000 in program funds to be used for travel associated with environmental activities.
Footnote: 3 Includes $483,858,000 in New Budget Authority. Excludes $17,119,300 carried forward from prior year funds, $35,693,000 in local currency trust funds, $4,500,000 in estimated reimbursements, and $75,000 in program funds to be used for travel associated with environmental activities.
Footnote: 4 Includes $17,500,000 transferred from the Development Assistance Account to Operating Expenses.
Footnote: 5 Includes $5,858,000 transferred from the Department of State for costs associated with administrative support provided via International Cooperative Administrative Support Services (ICASS).
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