199. Letter From the Assistant Secretary of State for International Organization Affairs (Cleveland) to the Managing Director of the U.N. Special Fund (Hoffman)0
Dear Paul: The Secretary has asked me to reply to your letter of March 1, 1962,1 wherein you discuss the future course of the Special Fund [Page 444] and especially your desires for additional matching by the United States Government of contributions made by other recipient governments. As you know, we indicated that Departmental staff would examine carefully your proposals in the light of the new initiatives connected with the Decade of Development and previous Congressional guidelines expressed in legislation governing our contributions to the Special Fund.
Our preliminary examination leads us to the conclusion that we should explore the possibility of matching the cash counter-part contributions which are centrally collected and audited, and administered by the Special Fund. These contributions—although project costs—appear to be somewhat similar to the local operating costs which are also centrally collected and audited and merged with the gross resources. However, I have asked that more data be secured on the types of costs covered by such contributions and the extent to which countries receiving Special Fund assistance provide this type of contribution.
It is our belief that cash counter-part contributions which are not processed through the Special Fund accounts and counter-part contributions in kind should not be matched. This belief is predicated on intent of Congress which has been rather clearly expressed. One of the ways in which the Congress intends to retain control of the matching contribution is that of matching funds deposited into the central accounts of the Special Fund. The stipulation in the AID legislation that we may only match “assessed and audited local costs” is another measure of control which cannot very well be exercised on contributions administered by governments or counter-part contributions in kind.
Further, I believe the Department must present a well justified case to the Congress so as not to cause a recurrence of the moves made several years ago to reduce the matching proviso to a lesser percentage.
As we move ahead on this proposition I must indicate the concern felt by a number of us about the large cash balances now existing in the Special Fund. I realize that many of the Special Fund projects require considerable time in terms of negotiating operations agreements and getting projects going, which in some cases may require three or four years to complete. However, given the close scrutiny now being made of the programs and budgets of all international organizations, I would hope that you might find ways to speed up the initial phases of the implementation process. I recall during your recent visit that one of the suggestions we discussed was the possibility of utilizing private contractors who might move ahead on projects which cannot now be handled by executive agencies within the UN family.2 Unless such a forward movement occurs, it is my feeling that we might need to reexamine the level of the [Page 445] cash payments we will be making to the Special Fund. Such a re-examination would not mean any decrease in the amounts made available but might influence the timing of our payments.
I would appreciate your informing me of your thoughts on this score and of actions we might take to be of assistance.
Sincerely yours,
- Source: Department of State, Central Files, 398.051/3-162. No classification marking. Drafted by Frank K. Hefner (IO/OIA) on April 5.↩
- Document 196.↩
- An apparent reference to Hoffman’s call on the Secretary on March 2; see the source note, Document 196.↩
- Printed from a copy that bears this typed signature.↩