The amounts in Miami involved some 34 to 41 persons. However, Price Waterhouse points out in its letter to AID that at least seven of the authorized recipients do not reside in the Miami area.

On April 28 again Price Waterhouse stated their concerns about this program and I quote again that, "Public Law 100-276 does not appear to specifically authorize cash payments to soldiers or their families, since the law only authorizes payments for food, clothing, shelter, medical supplies, and payment for such items or services.' Obviously, none of the three monitoring agencies could provide full documentation on the end use of these payments, nor were there any plans to obtain receipts for the expenditure of these funds.

In addition, I might point out that Price Waterhouse has documented certain cases in which the family assistance program may have been abused. In a June 20, 1988, memo to AID which is contained in the Price Waterhouse documentation, they point out that Contra family members are selling a large portion of supplied food to Hondurans and other Nicaraguan refugees in the Danli area, which was an area that was in particular viewed by Price Waterhouse auditors.

While it's clear that the authors of this law intended to continue the family assistance payments, it is my belief that Congress intended that these funds be used only as payment for food, clothing, shelter, medical services and medical supplies. Since it was anticipated that some $4 million of the $17.7 million would be set aside for humanitarian aid for this particular program, I think it's very important that AID and the monitoring agencies develop improved methods of verifying the end use of such funds.

These are families that reside outside of Nicaragua; Miami, Costa Rica, and Honduras. And I think such accountability can and should be provided.

On transportation costs, the expenditures in this area have involved basically the drops in Honduras along the Nicaraguan border, and for the resistance Indians. And there each of the agencies verifies in the form of contracts, the delivery that has been done by these transportation agencies, and the same is true for the assistance provided to the Indians, themselves.

The second area is the Verification Commission. Because the Verification Commission has not been able to come together to operate officially, the $10 million that was provided for the Verification Commission has not been provided en toto to the members of the Verification Commission. Instead, $3.2 million has been provided, $2.1 going to the General Secretary of the OAS, and $1.1 million going for Cardinal Obando y Bravo.

While there remain questions obviously as to what the Verification Commission will actually do with these funds, there is no reason to believe at this point that these funds are being misused in any way. AID and the monitoring agencies have made clear that they will verify such expenditures if and when the Commission takes effect.

The last area I want to address the Committee's attention to is the Children's Survival Assistance Program. This is a program that authorizes $17.7 million for children's survival assistance. To date,

$12.2 million has been earmarked for nine private voluntary organizations.

The Attachment A, which has been provided by AID, identifies those groups that have received those contracts. According to AID, less than $1.5 million has actually been spent because of barriers erected by the Nicaraguan Government to the expenditure of U.S. funds for these children.

At this time, the accounting organizations are just beginning to audit these programs. However, since these contracts to the PVO's basically follow AID standard contract requirements, there appears to be adequate documentation for the use of these funds.

In conclusion, Mr. Chairman, as I stated, in introducing this Resolution of Inquiry, that my interest here, and I think it is in the interest of all of us and certainly in the interest of the American people to ensure that the funds that have been provided here are well documented, and that we have appropriate accountability standards that are being applied.

There are two areas of concern that I would share with you. The areas relating to the use of cash payments and obviously the verification of end use. And my hope is that those areas can be improved between the agencies involved in the future.

I would be happy to answer any questions on the testimony. [The prepared statement of Mr. Panetta follows:]

STATEMENT OF THE HONORABLE LEON E. PANETTA

BEFORE THE HOUSE FOREIGN AFFAIRS COMMITTEE

JULY 13, 1988

Mr. Chairman and Members of the Committee, I want to thank you for taking the time and interest to hold this hearing on House Resolution 473. As you know, this is a resolution of inquiry I introduced on June 15, 1988, with the support of 146 of my colleagues, including a number of Committee members, to provide a full accounting of how the $47.9 million humanitarian aid package approved by Congress and signed into law on April 1, 1988 is being administered. I would like to thank George Ingram of the Committee staff for his assistance as well as representatives of the Agency for International Development, GAO and Price Waterhouse as well as the staff of the other responsible committees for assisting me and my staff over the past two weeks.

Let me state at the outset that the issue here is not the policy of the United States in Nicaragua, but whether that policy is being accurately implemented in accordance with the intent of Congress as reflected in the bipartisan humanitarian aid package adopted by Congress earlier this year.

Regardless of one's position on the amount and type of aid provided to the various political elements in Nicaragua, it is our responsibility to ensure that the funds approved by the Congress are fully accounted for. Indeed, Public Law 100-276 Central America law

the Assistance to

mandates specifically the type of assistance

allowed as well as the requirement for accountability standards, procedures and controls. It is our duty to the American taxpayer to

1

determine if these requirements are being met.

As members of this Committee know, I introduced a similar

resolution of inquiry in 1986 with regard to an earlier $27 million humanitarian aid package. During the course of that inquiry, the

General Accounting Office discovered that over half of the $27 million appropriated by Congress for humanitarian aid had not reached its intended destination but had ended up instead in offshore bank accounts of private citizens and the Honduran Armed Forces.

A resolution of inquiry is a legitimate tool for members of Congress to obtain important information and documentation as to the administration of any federal program. It is a vehicle to provide information to Congress, to foster cooperation between the executive and legislative branches, and to encourage auditing of how taxpayers' dollars are spent. The resolution proved helpful in 1986 and has once again proved effective in providing a paper trail on most of the financial transactions associated with this program, as well as information regarding the end use of items procured with U.S. dollars. Therefore, the purpose of the Resolution was to obtain full documentation of whether the $47.9 million aid package was being implemented in a fiscally accountable manner according to the letter and spirit of the public law. Let me make it clear that my interest in introducing this resolution was not to conduct a divisive inquiry but to ensure that the original goals behind this aid package are fulfilled. That is in the interest of the Administration, the Congress and the American people.

The Agency for International Development (AID) was chosen to administer this package. Certainly, AID should be commended for

performing a difficult task as well as can be expected under the

circumstances. As requested in the resolution of inquiry, AID

provided a paper trail on June 30, 1988, for most of the expenditures of funds to date under this legislation.

I have had an opportunity over the last two weeks to review the documentation provided to this Committee and to discuss this material with all the appropriate committees. I am satisfied at this time that

AID and the other agencies responsible for oversight and accountability have provided all the documentation available to meet the request outlined in the resolution. While there are certain end use areas that are not completely documented, this is a result of policy judgments rather than the lack or loss of documentation. Therefore, since all documents relating to legal opinions, accountability standards, humanitarian assistance, assistance for the verification commission and children's survival assistance have been provided in accordance with the Resolution, I would recommend that the Committee adversely report the resolution out of Committee and move to table the resolution on the House floor.

It is clear from the documentation provided that AID has implemented this entire program in a spirit of openness, allowing for close public scrutiny and review. In examining the documentation provided through this procedure, I had the opportunity to examine carefully how AID is implementing the law. This agency should be commended for how it has handled the administration of this program in the difficult political climate surrounding the issue of humanitarian aid. They have established internal procedures to guide their administration of the funds, and, in addition, their operations are