State Department quietly releases fiscal transparency report

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State Department quietly releases fiscal transparency report
U.S. President Barack Obama, right, visits the National Operations Center at the Department of Homeland Security (DHS) before delivering remarks on his Fiscal Year 2016 Budget in Washington, D.C., U.S., on Feb. 2, 2015. Obama sent Congress a $4 trillion budget that would raise taxes on corporations and the nation's top earners, spend more on infrastructure and housing, and stabilize, but not eliminate, the annual budget deficit. Photographer: Kristoffer Tripplaar/Pool via Bloomberg
On Friday, Republicans said President Barack Obama is still doing too little to promote economic growth, even as they welcomed the good news in the latest jobs report . Republicans have slowly embraced the idea that the monthly jobs reports from the Bureau of Labor Statistics show an economy on the mend.
FILE - In this Feb. 2, 2015 file photo, members of the media surrounds President Barack Obama's new $4 trillion budget plan as it is distributed by the Senate Budget Committee on Capitol Hill in Washington. A little-noticed proposal in President Barack Obama’s $4 trillion budget would eliminate the government's Overseas Private Investment Corporation, which has been the subject of an Associated Press investigation into its overseas loans, and merge it for efficiency with five other federal business and trade agencies. (AP Photo/J. Scott Applewhite, File)
National Economic Council Director Jeff Zients, talks about President Barack Obama’s Fiscal Year 2016 Budget, during a news conference at the Eisenhower Executive Office Building in the White House complex in Washington, Monday, Feb. 2, 2015. Obama sent Congress a record $4 trillion budget Monday that would boost taxes on higher-income Americans and corporations and eliminate tight federal spending caps to shower more money on both domestic and military programs. It would provide middle-class tax relief and fund an ambitious public works effort to rebuild aging roads and bridges. (AP Photo/Manuel Balce Ceneta)
Council of Economic Advisers Chairman Jason Furman, talks about President Barack Obama’s Fiscal Year 2016 Budget, during a news conference at the Eisenhower Executive Office Building in the White House complex in Washington, Monday, Feb. 2, 2015. Obama sent Congress a record $4 trillion budget Monday that would boost taxes on higher-income Americans and corporations and eliminate tight federal spending caps to shower more money on both domestic and military programs. It would provide middle-class tax relief and fund an ambitious public works effort to rebuild aging roads and bridges. (AP Photo/Manuel Balce Ceneta)
Office of Management and Budget Director Shaun Donovan, left, with Domestic Policy Council Director Cecilia Muñoz, talks about President Barack Obama’s Fiscal Year 2016 Budget, during a news conference in the White House complex in Washington, Monday, Feb. 2, 2015. Obama sent Congress a record $4 trillion budget Monday that would boost taxes on higher-income Americans and corporations and eliminate tight federal spending caps to shower more money on both domestic and military programs. It would provide middle-class tax relief and fund an ambitious public works effort to rebuild aging roads and bridges. (AP Photo/Manuel Balce Ceneta)
Council of Economic Advisers Chairman Jason Furman, talks about President Barack Obama’s Fiscal Year 2016 Budget, during a news conference at the Eisenhower Executive Office Building in the White House complex in Washington, Monday, Feb. 2, 2015. Obama sent Congress a record $4 trillion budget Monday that would boost taxes on higher-income Americans and corporations and eliminate tight federal spending caps to shower more money on both domestic and military programs. It would provide middle-class tax relief and fund an ambitious public works effort to rebuild aging roads and bridges. (AP Photo/Manuel Balce Ceneta)
President Barack Obama meets with financial regulators in the Roosevelt Room of the White House in Washington, Monday, Oct. 6, 2014. From left, Director of the Federal Housing Finance Agency Mel Watt, Director of the Consumer Financial Protection Bureau Richard Cordray, Federal Reserve Chair Janet Yellen, Treasury SecretaryJacob Lew, Securities and Exchange Commission (SEC) Chair Mary Jo White, Commodity Futures Trading Commission (CFTC) Chairman Tim Massad, Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, Deputy Treasury Secretary Sarah Bloom Raskin, White House Council Neil Eggleston, Council of Economic Advisers Chairman Jason Furman, Obama, Budget Director Shaun Donovan, Deputy Budget Director Brian Deese, and Special Assistant to the President for Economic Policy Seth Wheeler. (AP Photo/Evan Vucci)
WASHINGTON, DC - FEBRUARY 05: Treasury Secretary Jack Lew (C) poses for photographs with Senate Finance Committee Chairman Orrin Hatch (R-UT) (R) and ranking member Sen. Ron Wyden (D-OR) before testifiying to the committee about the Obama Administration's proposed FY2016 federal budget in the Dirksen Senate Office Building on Capitol Hill February 5, 2015 in Washington, DC. Hatch called the budget proposal unworkable but encouraged fellow senators to focus on the issues they agree on. (Photo by Chip Somodevilla/Getty Images)
WASHINGTON, DC - FEBRUARY 05: Treasury Secretary Jack Lew testifies before the Senate Finance Committee about the Obama Administration's proposed FY2016 federal budget in the Dirksen Senate Office Building on Capitol Hill February 5, 2015 in Washington, DC. Finance Committee Chairman Orrin Hatch (R-UT) called the budget proposal unworkable but encouraged fellow senators to focus on the issues they agree on. (Photo by Chip Somodevilla/Getty Images)
WASHINGTON, DC - FEBRUARY 05: Treasury Secretary Jack Lew (R) testifies before the Senate Finance Committee about the Obama Administration's proposed FY2016 federal budget in the Dirksen Senate Office Building on Capitol Hill February 5, 2015 in Washington, DC. Finance Committee Chairman Orrin Hatch (R-UT) called the budget proposal unworkable but encouraged fellow senators to focus on the issues they agree on. (Photo by Chip Somodevilla/Getty Images)
WASHINGTON, DC - FEBRUARY 05: Sen. Mark Warner (D-VA) listens to testimony from Treasury Secretary Jack Lew during a Senate Finance Committee hearing about the Obama Administration's proposed FY2016 federal budget in the Dirksen Senate Office Building on Capitol Hill February 5, 2015 in Washington, DC. Finance Committee Chairman Orrin Hatch (R-UT) called the budget proposal unworkable but encouraged fellow senators to focus on the issues they agree on. (Photo by Chip Somodevilla/Getty Images)
WASHINGTON, DC - FEBRUARY 05: Treasury Secretary Jack Lew (L) shakes hands with Senate Finance Committee Chairman Orrin Hatch (R-UT) before testifiying to the committee about the Obama Administration's proposed FY2016 federal budget in the Dirksen Senate Office Building on Capitol Hill February 5, 2015 in Washington, DC. Hatch called the budget proposal unworkable but encouraged fellow senators to focus on the issues they agree on. (Photo by Chip Somodevilla/Getty Images)
FILE - In this Oct. 2, 2014, file photo, Vice President Joe Biden answers questions from students at Harvard University's Kennedy School of Government in Cambridge, Mass. Biden’s biggest mistake in accusing U.S. allies of supporting extremists in Syria may be that he said publicly what Obama administration officials have long preferred to say only privately. Biden apologized over the weekend to Turkey and the United Arab Emirates after saying they had a role in allowing foreign fighters, weapons and money into Syria to bolster groups fighting Syrian President Bashar Assad. He also made similar statements about Saudi Arabia’s role in aiding extremists. (AP Photo/Winslow Townson, File)
FILE - In this Monday, Jan. 12, 2015 file photo, An Afghan money changer, right, counts a pile of currency at the Money and Exchange Market in Kabul. Afghanistan’s fragile economy has lost around a third of its value in the past year as the international military and aid organizations that poured in cash for more than a decade have drastically scaled back after U.S. President Barack Obama declared an end to the 13-year war against the Taliban _ leaving the government struggling for funds and key sectors lacking investment, economists, analysts and officials said. (AP Photo/Massoud Hossaini, FIle)
U.S. Secretary of State John Kerry listens to translation during a joint news conference with Egypt's Foreign Minister Sameh Shukri in Cairo, Egypt, Sunday, Oct. 12, 2014, as part of a donor conference to help Gaza rebuild after the war between Israel and Gaza's militant Islamic group Hamas this summer. Organizers of the Cairo conference hope pledges of over 5 billion dollars by donors will be paid over the period of three years to aid reconstruction in the Gaza Strip, which borders Israel and Egypt. Both countries have blockaded Gaza since Hamas took power there in 2007, causing the territory of 1.8 million people economic hardships and high unemployment. (AP Photo/Carolyn Kaster, Pool)
US Secretary of State John Kerry (L) talks with Kuwaiti Foreign Minister Sabah Al-Khalid al-Sabah during the Gaza Donor Conference in Cairo on October 12, 2014, aimed at helping the Gaza Strip pummelled by the 50-day war between Israel and Hamas militants earlier this year. Qatar promised $1 billion in reconstruction aid for Gaza at a donor conference in Cairo on Sunday, topping US and European pledges for the devastated Palestinian enclave. AFP PHOTO / KHALED DESOUKI (Photo credit should read KHALED DESOUKI/AFP/Getty Images)
US Ambassador Kurt Tong (C), Principal Deputy Assistant Secretary for the Bureau of Economic and Business Affairs at the Department of State, delivers a speech on Institutional response to Asia's development challenges at the Asian Development Bank Institute in Tokyo on February 9, 2015. Tong will also attend the meeting of the second Japan-US Development Dialogue (senior level) on February 10. AFP PHOTO / KAZUHIRO NOGI (Photo credit should read KAZUHIRO NOGI/AFP/Getty Images)
House Foreign Affairs Committee Rep. Ted Poe, R-Texas, shows a picture of a $400,000 fiberglass camel statue that the State Department plans to purchase for the new American embassy in Islamabad, Pakistan as he questions U.S. Agency for International Development (USAID) Administrator Rajiv Shah, during a hearing on "U.S. Foreign Assistance in FY 2015: What Are the Priorities, How Effective?" on Capitol Hill in Washington, Wednesday, April 9, 2014. (AP Photo/Manuel Balce Ceneta)
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President Barack Obama released his federal budget this week to much publicity, analysis and politicking. But before the federal budget was the release of the State Department's annual Fiscal Transparency Report, a document that analyzes budget transparency of governments that receive U.S. assistance - and reveals that certain countries still receive aid from the U.S. even though they don't meet fiscal transparency requirements.

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A provision in the Appropriations Bill requires the State Department to produce the report examining all 140 countries that were potential recipients of bilateral allocations in fiscal 2014. The report, quietly released Jan. 14, rated them based upon transparency of budget information and natural resource extraction contracting and licensing.

The State Department and USAID funding for fiscal year 2014 was $46.9 billion. Fifty countries that year did not meet the minimum requirements of fiscal transparency. Thirty-nine of those 50 countries - including Afghanistan, Egypt, Haiti, Nigeria and Saudi Arabia - were found not to have made "significant progress" toward meeting those requirements, but will still continue to receive aid. Cutting them off, experts told U.S. News, could have devastating political and strategic consequences.

Ryan Crocker served as ambassador to Afghanistan from 2011 to 2012 and says understanding why the U.S. gives aid to the country must be considered in context of its history. Since 1919, Afghanistan has relied on foreign assistance to operate, but the country collapsed a few years after the Soviet Union withdrew in 1989. This paved the way for the Taliban to take control of Afghanistan until the U.S.-led invasion in 2001.


"What we're giving is a pretty small installment on an insurance policy without which we could see a return to the utter chaos that brought us 9/11," Crocker says.

Although the U.S. combat operations in Afghanistan ended in 2014, a small number of personnel remain there. Continuing aid to the country is in U.S. interest, Crocker points out, but the Afghan government must do a better job with accountability and transparency.

Egypt receives items, not cash, from the U.S., and continues to do so because it is a vital partner for the U.S. in the volatile Middle East. "The actual physical, geographic location of Egypt is important for U.S. projection of power around the region," explains Amy Hawthorne of the Rafik Hariri Center for the Middle East at the Atlantic Council. It is also one of few Arab countries at peace with Israel, a major U.S. ally, and much of what the U.S. sends to Egypt is dedicated to encouraging that peace.

The U.S. continues to send aid to Haiti, not only to help the tiny island nation rebuild after the 2010 earthquake killed 222,750 people and decimated government buildings, but also because Haiti "was not like other countries," says Bob Perito, executive director of consulting firm The Perito Group. The Haitian government doesn't have an education system or health system; it doesn't provide a sewer system or running water. Perito says that the government has been very corrupt and ineffective, but the U.S. has worked to strengthen it and make it operate even if some of the money isn't used the way it should be.

[ALSO: Afghanistan's Leaders Petition for Billions in Aid]

"One of the ways that that happens is to pump money through the government system and force the finance ministry to create a budget, to administer its budget and to fund government agencies, and to force those government agencies then to go out and to actually do things that you'd expect the education ministry or the health ministry or the justice ministry to do," Perito says. "We're never going to solve the problems of Haiti if Haiti does not have a functioning government."

Despite the increasing threat posed by terrorist group Boko Haram, the U.S. provides little defense-based aid to Nigeria. Instead, U.S. aid to Nigeria is overwhelmingly earmarked for health, says John Campbell, ambassador to Nigeria from 2004 to 2007. Most of it is provided as a part of the President's Emergency Plan for AIDS Relief, or PEPFAR.

"The point about PEPFAR money is once that you start you can't stop," Campbell says. "In other words if you withdraw funding for PEPFAR in a country like Nigeria, what you end up with is soaring deaths from HIV/AIDS."

Saudi Arabia continues to receive assistance, despite its wealth and lack of fiscal transparency, because it's a secure petroleum exporter and plays a critical role in the Gulf Cooperation Council, a political economic union of Arab states in the Gulf, according to Anthony Cordesman, a chair in strategy at the Center for Strategic and International Studies. It's also a key U.S. ally in the Middle East as part of a coalition working to defeat the Islamic State group.

"It's a key partner in the Gulf, a key partner in terms of overall security issues, in terms of areas like Syria, Iraq, quite a number of other structures," Cordesman says. The U.S. has sold the Gulf country military equipment and provides training in the use of such weapons, as well as other security-related assistance. New Saudi King Salman, who took office after the death of King Abdullah in January, is likely to continue to closely cooperate with the U.S.

Provisions that required the department to assess transparency and link assistance to those findings has been included in past budgets in various forms, but 2014 was the first year State was required to make the report public. So far, it hasn't generated the type of attention produced by the annual Human Rights Report, which details human rights conditions in nearly 200 countries and territories.

Sen. Patrick Leahy, D-Vt., has long been an advocate for closer examination of foreign assistance funds and is responsible for the provision requiring the fiscal transparency report. Tim Rieser, a foreign policy aide to Leahy, says the senator and other Members of Congress have concerns about foreign governments that misuse their own resources and then ask the U.S. for aid to take care of their people.

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"Senator Leahy does not want to give aid to governments whose officials spend public funds to enrich themselves rather than to address the needs of their people, so that was genesis of the law," Rieser says. "He's felt that for too long we have been helping countries without insisting that their governments be transparent about how they are spending their own resources. He believes that we should stand for the principle that they should be accountable to their people."

The State Department Report says transparency is a key element of effective public financial management and can help countries achieve economic sustainability. Still, in the proposed edits in the budget for fiscal year 2016 released Feb. 2, the administration requested the fiscal transparency report requirement be removed. They did the same in fiscal year 2015. The department says this it is standard practice for it not to request imposing reporting requirements on itself. Congress makes them law by including the provisions in the Appropriations Bill.

The report's purpose is also to "help ensure U.S. taxpayer money is used appropriately," but failure of a government to be found transparent does not mean funds will be cut off. In the past, many countries that were not found to be transparent received waivers from the secretary of state.

A State Department official told U.S. News on background that a lack of fiscal transparency doesn't necessarily mean that a government is corrupt.

"It's more of an enabling factor for corruption, so it's not necessarily the case that countries that have failings in fiscal transparency are not using U.S. taxpayer money well," the official says. "It's just the more information that is public about how countries craft their budgets, the better people are able to evaluate how money is being used."

Vivek Ramkumar directs the Open Budget Initiative at the International Budget Partnership, says waivers issued by the Secretary of State for countries not found to be transparent were previously "grossly misused." The State Department official said "quite a lot" of countries received waivers.

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"Fiscal transparency is seen as an inconvenience here," Ramkumar says. "So they have found reasons to constantly continue aid to countries, even when my organization conducts fiscal transparency assessments and we don't agree with their assessment in previous years."

The Open Budget Index, an independent assessment of budget transparency produced by the International Budget Partnership, found 77 of 100 countries examined did not provide significant budget information to their citizens in 2012.

Ramkumar says that while his organization also has problems with this year's assessment, one of the benefits of delinking aid with the report findings is that State can give a more honest assessment of foreign government budget transparency in the report as a part of a "naming and shaming."

"We're finding in fact this is probably a more effective tool in terms of encouraging countries," the State Department official says. "There seems to be more attention this year from countries we asses than maybe we've seen in previous years."

"Governments like to know where they stand," Rieser says. "They don't like being on lists that show them falling short compared to their peers."

Countries found to be insufficiently transparent but want to improve can benefit from $10 million in funds set aside in the same Appropriations Bill provision. The State Department and the U.S. Agency for International Development coordinate in using the money to support programs and activities aimed at improving public financial management and fiscal transparency standards. The State Department official calls this the "carrot to the stick of the report."

In fiscal year 2013, the department used $5 million from the fund for 11 projects in Chad, Democratic Republic of the Congo, Gabon, Guinea, Haiti, Malawi, Nicaragua, Niger and Somalia, as well as one regional and one global project.

"If the U.S. is serious about seeking improvements in fiscal transparency in countries around the world then most important thing to do would be to ensure that governments buy into this agenda, that there's country ownership, and that the agenda for fiscal transparency improvements is not based on a one size fits all," Rathkumar says.

He says the report should be elevated to the status of the Human Rights Report so countries take the findings more seriously.

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