TANZANIA

Two duplicate obligations had been made for the same purchase-38 typewriters costing $7,728. When IGA brought this situation to the attention of the AID Mission, steps were immediately taken to correct the error and to employ one of the obligations for other uses.

THAILAND

An IGA review of the malaria eradication program revealed that about $30,000 worth of AID-financed commodities were excess to the project's needs in North Thailand. The commodities were shifted to Bangkok for use there.

TUNISIA

1. About $560,000 worth of AID-financed equipment had been supplied to agricultural machinery repair shops. An IGA team noted that four of the shops were not open and that others were underemployed. IGA thereupon recommended that the Mission make a high-level approach to the Government of Tunisia, aimed at bringing about effective use of these shops. This was done, and marked improvements resulted.

2. In the interest of U.S. balance-of-payments, IGA recommended that the U.S. country team do more to encourage the use of U.S.-owned excess dinars by all those authorized to purchase them. This was done.

TURKEY

At an IGA suggestion, AID revised instructions to its overseas missions toward the end of insuring that AID-controlled local currency will not be used to finance gambling facilities or hotels proposing to have such facilities.

URUGUAY

1. IGA recommended arrangements whereby local currency, rather than U.S. dollars, would be used to pay certain technical and administrative support costs. AID adopted the suggestion. Budgetary and balance-of-payments savings will be in the neighborhood of $90,000.

2. IGA endorsed a proposal whereby the Uruguayan Armed Forces would be permitted to sell used United States-financed jeeps and to use the sales proceeds for buying new jeeps in the United States. The arrangement was designed to reduce repair costs and to assist the U.S. balance-of-payments situation. The Department of Defense thereupon said that it would take steps to carry out the proposal.

VIETNAM

1. Information developed by IGA furnished the starting point for an AID and Congressional investigation of transactions involving a United States supplier for the commodity import program. The supplier was in due course indicted for filing false certificates to obtain AID funds, pleaded no contest to the indictment, and is now awaiting sentence.

2. A comprehensive IGA review of the computer-based information system employed for the Viet-Nam AID program proved of assistance to senior mission officials in their efforts to make the system a more effective management tool.

3. $1.4 million worth of structural steel was sent to Viet-Nam for the construction of barges. Only a small quantity was used for this purpose and IGA's expression of concern over the stored balance contributed to its reallocation for use in the post-Tet emergency.

4. After visiting a warehouse complex, IGA inspectors reported to the AID Mission about considerable quantities of rice which, because of poor warehousing practices, had become infected. The Mission reported that the U.S. Army had been requested to fumigate the warehouses, and had done so. In keeping with IGA recommendations, the Mission then took additional steps aimed at keeping the rice vermin-free.

5. IGA findings to the effect that large numbers of people still on refugee lists had long been resettled and integrated in new locations contributed to efforts to establish a more accurate count of the true refugee population.

6. Noting that the large bulk of the refugees are in the I and II Corps areas, IGA recommended that additional resources in men and materiel be transferred to these Corps areas from III and IV Corps, where the need for them is less pressing. This was done.

7. IGA observations played a part in steps taken to beef up staffing in refugee reception centers. IGA expressions of concern over inadequate transportation support for the refugee program were followed by corrective steps.

8. IGA inspectors going through Saigon docks came upon some 18,000 AIDfinanced instruction books, which were earmarked for auction and of whose existence the AID Mission was unaware. Steps were taken to recover the books for use in the Viet-Nam education system.

9. AID-financed shipments of iron and steel secondary products from the United States had a troubled history. IGA expressions of concern played a part in a decision to have the Government of Viet-Nam henceforth buy such products with its own foreign exchange.

10. Information developed by IGA on certain supplier payments permitted AID to obtain a $9,900 refund.

11. IGA cited instances of where, although large amounts of money had been spent to airlift AID-financed goods to Viet-Nam in the interest of speed, the goods went unused for long periods of time after their arrival. Despite a last-minute attempt by AID to stop the use of air transport, in one case $40,000 had been spent to ship 12 tons worth $6,000 of pipes and fittings. In another case $25,000 had been spent to ship $125,000 of teletype equipment for which no immediate use seemed indicated. IGA therefore recommended a general tightening up of procedures governing air shipments. This was done.

Balance of payments and the special letters of credit procedure

IGA learned that several AID missions in Latin America were using the socalled Special Letter of Credit procedure to generate local currency for loan projects, but not for grant projects. Moneys needed for the grant projects were being purchased instead with dollars, thus contributing to the United States balance-of-payments drain. AID adopted an IGA recommendation that the SLC procedure be used both for grants and loan projects. As a result, the United States balance-of-payments drain should be reduced by several million dollars annually. Deobligation of investments survey funds

Under this program, AID may, in certain circumstances, pay one-half of the cost of surveys conducted by private industries or companies to determine the feasibility of a possible foreign investment.

A detailed IGA financial analysis of this program brought to light many instances in which moneys not required for the program were still tied up and carried on the books. When AID learned of this situation, it agreed to make an immediate review of outstanding obligations. About $800,000 was deobligated as a result.

School partnership program

Under this program American school children make contributions to foreign schools with which the Peace Corps is associated. The Peace Corps adopted IGA recommendations for improving the financial management of this program. Use of excess U.S.-owned currency for air travel and air freight

Through an oversight, instructions requiring the use of excess U.S.-owned currency for air travel and air freight to and from Bolivia and Morocco had never been issued. This was done after IGA pointed out the gap.

Balance of payments and Public Law 480 sales

IGA recommended that, for countries where the United States needs local currency, the initial down payment on P.L. 480 loans consist not only of the standard five per cent dollar payment, but also an additional payment in local currency. This could in certain conditions produce a current saving in the U.S. balanceof-payments. AID, with other Inter-Agency Staff Committee members, is exploring this and other P.L. 480 financing techniques.

Uncollected bill

A bookkeeping review of a contract between CUNA International and AID showed that some $30,000 of money owed to AID had gone uncollected for a long period of time. Prompt corrective action was taken after IGA invited the attention of AID to this matter.

Procurement of automobiles

IGA cited instances of where AID contractors were buying autos from private dealers at prices substantially above those the government would pay if it pur

chased the cars through the General Services Administration. AID issued instructions calling for greater reliance on GSA procurement.

Prior screening of commodity eligibility for AID financing

Information developed by IGA on AID-financed imports of luxury and ineligible goods played an important part in causing members of the Congress to urge that AID start screening commodities for eligibility prior to financing, rather than relying upon post-audit. A commodity eligibility pre-validation system was thereupon put into effect. The screening unit established in the spring of last year has to date ruled that over $6 million of proposed imports should not be financed by AID.

Labels

IGA took exception to the prices being charged for pasting AID handclasp and Alliance for Progress labels on AID-financed taxis. In one case, a supplier was charging $7.50 for affixing two gummed labels on a car. The labels in question cost less than 2 cents a piece and can be pasted on a car in a matter of seconds. One supplier thereupon agreed to refund over $6,000 to AID for past labeling charges and to make no further charges in the future. Another supplier agreed to stop additional charges and to make a partial refund of past charges. AID is now following an IGA recommendation that it make a comprehensive review of all labeling costs for AID-financed equipment.

Hon. KARL E. MUNDT,
U.S. Senate,

Washington, D.C.

DEPARTMENT OF STATE,

THE INSPECTOR GENERAL OF FOREIGN ASSISTANCE,

June 26, 1969.

DEAR SENATOR MUNDT: You will remember the yeoman work which you and Senator Williams did a year ago last spring, when you got AID to do advance screening of AID-financed imports, toward the end of trying to make sure that AID would not pay for luxury goods and other things it made no sense for AID to finance.

The system put into effect at the urging of you and Senator Williams has now been operating for somewhat more than a year. This morning, we checked to see how much money has been saved as a result.

We learned that, to date, this advance screening procedure has caused over $11 million worth of proposed imports to be rejected as ineligible for AIDfinancing.

I would say that wasn't a bad morning's work!
Sincerely,

J. K. MANSFIELD.

The CHAIRMAN. I would like to join the Senator in what he says. I think the Inspector General has done a very good job.

Senator WILLIAMS. I think he should be given credit for it at this point.

The CHAIRMAN. They have been very effective.

Is that all?

Senator WILLIAMS. Yes, that is all.

The CHAIRMAN. Senator Case.

Senator CASE. Thank you, Mr. Chairman.

I, too, have only a very few questions.

TOTAL AMOUNTS REQUESTED

I wonder if, Mr. Secretary, your summary of your program is just another way of stating the same total amounts that are earlier described by functions; is that correct?

Secretary ROGERS. That is correct, when you add on the items that are attributed by region.

Senator CASE. So that the whole thing still comes to about $2 billion what?

Secretary ROGERS. The total A.I.D. program proposed is $2.4 billion. Senator CASE. $2.4 billion. That is everything, I take it, except the President's emergency fund; is that about the way it is conducted? Secretary ROGERS. Yes, and such items as contributions to multilateral programs, administrative expenses, program support costs, the central research program, and so forth. $75 million for this OPIC, the Overseas Investment Corp.

ADVISORY COMMISSION

Senator CASE. Now, I note with the greatest interest the President's proposal of an advisory commission. How is that coming along? Secretary ROGERS. We would expect an announcement on that fairly soon, I would expect in a couple of weeks.

Senator CASE. And the schedule for doing its work and making its report is still as outlined here?

Secretary ROGERS. Yes.

Senator CASE. Roughly by early next year, I take it?

Secretary ROGERS. That is correct.

Senator CASE. Then in a real sense much of what you are doing here is a kind of tentative thing depending on this very full review; that is correct, is it not?

Secretary ROGERS. Yes.

VIETNAM ECONOMIC AID FIGURES

.

Senator CASE. In that connection, just a couple of specific questions. I note that Vietnam is in for $440 million. These are largely grants, are they not, under supporting assistance?

Secretary ROGERS. Yes, that is correct. The entire program consists of supporting assistance grants.

Senator CASE. And that comprises about four-fifths of the request for supporting assistance?

Secretary ROGERS. Yes.

Senator CASE. Which is roughly $515 million?

Secretary ROGERS. That is the appropriation request; the proposed program is $578 million.

Senator CASE. In addition, how much does the Food for Peace. program propose to spend in Vietnam?

Dr. HANNAH. We have it here, Mr. Senator. You have the information on it? I am told $173 million.

Senator CASE. $173 million. So that the total in Vietnam of economic assistance

Dr. HANNAH. $440 million and $173 million, approximately.
Senator CASE. That would be $613 million.

Secretary ROGERS. $613 million, roughly.

Dr. HANNAH. The breakdown on the $140 million you will find on K-1 in this book that you have been furnished, which is $240 million for the commercial import program, $175 million

Senator CASE. Excuse me. That means really a gift to them of money so they can buy stuff, is that it? By commercial imports you mean Hondas and all the rest of it, commercial items for the local market, is that correct?

Dr. HANNAH. That is right. The principle, but we do not finance Hondas or similar items and would not, in any case, be financing Japanese goods. Of course, the objective is quite different than that, you understand.

OBJECTIVE OF COMMERCIAL IMPORT PROGRAM

Would you give us the objective? This is not an unfriendly question, but just to evoke some kind of evidence of what we really are doing there.

Dr. HANNAH. Some years back when the inflation was getting out of hand, this program was devised to assist the Vietnamese Government in keeping it under a reasonable degree of control. Everything that comes into the country under our CIP program, commercial imports program must be approved by our American staff as well as by the Vietnamese. That means that the private importer, the supplier and the commodity must be approved by both the Vietnamese and ourselves. Then they get the permit to buy.

If U.S. funds are involved, of course, there is normally a requirement that the money be spent in the United States, and the payment is not made to the Vietnamese Government. The payment is made to the supplier in the United States and, of course, the acquisition has to be in accordance with bids and all of the usual restrictions.

The local currency that is generated is paid by Vietnamese private importers to help finance the Vietnamese military and civil budgets.

Now, this is a little involved to get into, and I am not the world's best explainer. I would like, Senator Case, to submit to you a carefully thought-through statement that will be put in the record.

Senator CASE. Mr. Chairman, if there is no objection, may we have the statement Dr. Hannah has spoken of preparing inserted in the record?

The CHAIRMAN. Oh, yes, certainly.

(Discussion off the record.)

(The following statement was later supplied :)

THE COMMERCIAL IMPORT PROGRAM

The U.S. assistance provided in the form of the Commercial Import Program (CIP) is a major tool to help cushion the inflationary impact of rapid manpower mobilization and rising Vietnamese military expenditures on the economy of Vietnam. These expenditures are increasing as Vietnamese troop levels are raised and thus facilitate reduction in the number of U.S. troops in Vietnam. Together with the Government's effort to raise revenues through taxes and custom duties, the CIP is designed to keep inflationary pressures arising from the Vietnamese budgetary deficit under control and prevent the serious consequences of a run-away inflation.

The aims of the CIP are to guard against shortages, commodity speculation and spiraling prices by insuring the availability of certain intermediate and consumer goods, and to provide raw materials and machinery for domestic industry. The CIP is limited in essence to the importation from the United State or through barter transactions from certain third countries of commodities which are deemed essential to the maintenance of production and reasonable stability of the Vietnam economy.