The increases in the amounts of specific risk investment guarantees outstanding at the end of each calendar year, shown in the chart, are less than the amounts of new guarantee coverage written for each of the years as indicated on page 4 of the statement. The principal reason for the variance is the fact that the yearend amounts reflect reductions and terminations of existing contracts which had taken place during the year while the amounts of new guarantee coverage written do not. Other factors which contribute to the difference, although to a lesser degree, stem from the internal reporting mechanism. For example, postdated contracts (i.e., contracts taking effect up to 6 months after execution) are issued under the guarantee program. The yearend may intervene between the execution date and the effective date of coverage. In other cases, contracts executed late in one calendar year may not be picked up by the Controller in time to be included in the amount outstanding at the end of the year. The following summary reconciles the variances since 1961 on a yearly basis:

1 Principal factor in large overstatement of guarantees written in 1963 and subsequent understatement in 1964 was $67 million in contracts written late in 1963 but not reported until 1964.

Mr. ZABLOCKI. On page 2, Mr. Hoagland, in your presentation you refer to programs, I think the figure was 400-maybe it is pure coincidence, there are 400 inquiries per month in the Business Information Center, you had 400 requests per month for the "Catalog of Investment Information and Opportunities" and in the presentation book there is a figure of more than 400 AID-financed projects in the less developed countries.

Is this a magic number in your shop?

Mr. HOAGLAND. It turns out to be this year, but it is coincidence. Mr. ZABLOCKI. You have mentioned that there are certain amendments in the legislation that are before us that affect your department. They are on title III, primarily, are they not, as to the amounts?

Mr. HOAGLAND. Yes.

Mr. ZABLOCKI. Which are predicated on a 5-year authorization.
Mr. HOAGLAND. That is correct.

Mr. ZABLOCKI. That is unrealistic, as you know. We are not going to authorize a 5-year authorization. Could we have the figures for a more realistic authorization that you are going to receive?

Mr. HOAGLAND. I would be glad to furnish the figures for whatever number of years that would be useful to you.

Mr. ZABLOCKI. It would not be $10 billion; $5 or $6 billion would more likely be the amount that you would be authorized-a 2-year authorization.

I think we ought to have the figures that would be needed for a 2-year authorization in each instance, section 104 (a), subparagraph

(a), 104(a)(2), (3), as well as to your request for the amendments to section 105 (d), paragraph 3.

Mr. HOAGLAND. We would be glad to furnish that.

Mr. ZABLOCKI. AID assists the International Executive Service Corps, does it not?

Mr. HOAGLAND. Yes.

Mr. ZABLOCKI. In the presentation book that is the only nonprofit organization which is spelled out. How many other private, nonprofit organizations are engaged in similar work?

Mr. HOAGLAND. I probably couldn't give you a number, but I can refer to some of them.

Mr. ZABLOCKI. If you could for the record supply the number. For example, the Council for International Progress in Management was in existence long before the International Executive Service Corps was talked about in 1963. Yet today we are paying out of AID funds 75 percent of the direct project costs and 65 percent of nonproject

costs.

To what extent are AID funds used by any other private nonprofit organization?

(The information follows:)

INTERNATIONAL EXECUTIVE SERVICE CORPS AND OTHER NONPROFIT ORGANIZATIONS PROVIDING TECHNICAL ASSISTANCE TO INDUSTRY IN THE LESS DEVELOPED COUNTRIES

As of December 31, 1965, there were 54 technical service contract or grant agreements entered into by AID with nonprofit firms and associations, exclusive of universities. There appears to be only one organization, the Council for International Progress in Management, some of whose activities are in the same general area as IESC. Some other nonprofit organizations, the Brookings Institution and the Stanford Research Institute, have made studies in the past year under AID contracts to broadly assist private enterprise in some of the less developed countries. There is no standard overhead rate used in these technical service contracts. Charges for administrative services are negotiated case by case and generally definitions of direct and indirect costs reimbursable at different rates are established.

The Council for International Progress in Management has a number of contracts with AID for services to be performed in less developed countries. The Council plans and conducts seminars for industrial managers from private businesses in foreign countries, assists local management by providing management specialists and technical advisers. It provides investment counsel and production assistance as well as development planning and training programs. In 1965, its AID contracts totaled $1.022 million for which it was reimbursed a little over $100,000 for home office staff services.

The International Executive Service Corps, a new organization which completed its first full year of project activity in January 1966, received from AID for the calendar year 1965 the sum of $690,476.69 to carry on its program of direct assistance to private enterprise in developing countries. Of this amount, $188,575 was for salaries. Home office administrative charges totaled $76,774.18. Under the terms of the grant agreement with IESC, AID reimburses the Corps for specific percentages of approved project and nonproject costs. Through calendar year 1965, AID reimbursed 80 percent of IESC direct project costs and 75 percent of its indirect project costs. For the year beginning January 15, 1966, the percentages were reduced to 75 percent and 65 percent, respectively. Further reductions are anticipated as IESC receives increasing support from the American business community and reduces the starting up level of its operating costs. The IESC is a new approach to improving the management practices of private enterprises in the less developed countries. The idea of sending an experienced

American businessman as an unpaid volunteer to assist a business in his line was first advanced by two members of Congress and a prominent American businessman. After a review by several departments of the Government and with congressional approval, AID made a grant to the newly formed IESC providing financial assistance for its early development. To speed the organization of IESC and make its program available on a worldwide basis the initial funding was substantial. There are some other nonprofit organizations, but not in the field of business, which also receive substantial financial assistance from AID. The Executive Corps program has been well received in 20 of the less developed countries and by the American business community. Its project level is continuing to accelerate and the direct business to business assistance which it provides appears to be serving a need in the less developed countries.

Mr. HOAGLAND. There are many organizations, cooperatives, savings and loan organizations, who have contracts with us to furnish technical assistance. CIPM is a very valuable source of this kind of help whose contract has been extended for another year and which is carrying on some interesting work in connection with placing foreign students in American industry for a year following their graduate work in this country.

I don't have in mind a fixed number of organizations of this kind but I would be glad to furnish you with additional material of this kind.

Mr. ZABLOCKI. Would you be in a position to have the information to present to the committee as to these other nonprofit organizations engaged in activities similar to those of the International Executive Service Corps? Do they receive any AID funds for their support? Mr. HOAGLAND. I do not have their budgets.

Mr. ZABLOCKI. Would you be in a position to get their budgets? Mr. HOAGLAND. I could. I doubt any one of them have their workers serving in the field without salary, which is the significant feature of the International Executive Service Corps.

Mr. ZABLOCKI. Is the International Executive Service Corps truly a nonprofit organization if the president is receiving $31,000? Mr. HOAGLAND. It is a nonprofit organization in the sense that no one has an equity ownership in it

Mr. ZABLOCKI. If they pay themselves an enormous salary that is not a charitable contribution on the part of those who are managing it. Mr. HOAGLAND. The effort is to have an efficient organization managed by people who are accustomed to large responsibilities. The president, Frank Pace, Jr., has had extensive experience both in industry and government. I believe that salary is appropriate for him and the Government will get its money's worth.

Mr. ZABLOCKI. Could we have a justification for showing preferential treatment to such an organization when we have had over the years a record of contributions on the part of people in private life giving part of their time for this very same purpose and not getting a salary?

Mr. HOAGLAND. These people, I want to be sure this is clear, Mr. Zablocki, the volunteers who go out on the project

Mr. ZABLOCKI. Are they paid by the International Executive Service Corps?

Mr. HOAGLAND. They are paid something like $1,000 a month for expenses, but no salary.

Mr. ZABLOCKI. It is my understanding the salary cannot be in excess of $26,000 for any person involved in the International Executive Service Corps.

Mr. HOAGLAND. That is a correct statement with respect to the administration of the program by the executives who are not out working on a project, but who are running the organization at its headquarters. I should point out that as to the salaries on which the United States pays a share of the cost, we do not pay any share of the amounts over $26,000.

Mr. ZABLOCKI. Mr. Chairman, I know my time is running short. May I ask a few questions so we can get some information to see whether AID is actually justified in this particular field? It is my understanding that AID's contribution for fiscal year 1966 is estimated at one and a half million dollars for the International Executive Service Corps.

For the record, would you supply how much AID has contributed to any of the other voluntary nonprofit organizations that have been in the same field, whether there is any duplication, whether the International Executive Service Corps has entered into areas where other nonprofit organizations are active. I would like to have a justification for this entire program.

Mr. HOAGLAND. We would be glad to furnish that.

Chairman MORGAN. Mr. Adair.

Mr. ADAIR. Mr. Chairman.

Mr. Hoagland, as you know, this committee has been very much interested for a number of years now in the area with which you are primarily concerned. I personally have a great many questions about the whole matter of extended risk guarantees, but rather than try to explore those in the committee here, which would be, I think, excessively time consuming, I would like to ask if you and I couldn't sit down sometime reasonably soon for a half hour and go in some depth into this whole question.

Mr. HOAGLAND. I would be glad to do that.

Mr. ADAIR. You are proposing that we strike out the date which we put in last year, December 1, 1965, and make this a matter of Presidential discretion in fact?

Mr. HOAGLAND. Yes, sir.

Mr. ADAIR. Without having reached a decision in my own mind upon that point, I would just ask you whether or not you do not feel that to do this would remove another control which the Congress has over this program and put it in the hands of the Executive, if we just say in effect "Mr. President, you are entirely free to use your own discretion in this matter after 1966"?

Do you have any thoughts upon that?

Mr. HOAGLAND. I think it is a matter of balancing what this particular amendment might do and how it is used against the general problem of the administration in determining what country to carry on an assistance program in. It is certainly correct that this shifting is a conversion of a mandatory requirement into a discretionary

requirement. The measure it seems to me has been a useful one up to this point. It is hard to tell what influence it has had on countries. I think it probably has had some influence in helping us to get the agreements we have.

Mr. ADAIR. There has been testimony in previous years that that was the case. When we first fixed 1965, it was indicated that it might be a useful persuader.

Mr. HOAGLAND. Yes.

Mr. ADAIR. When you came before us a year ago and said another year was necessary, without any opposition this committee wrote in the new date, and it is my feeling that we would continue to be quite willing to do that if you felt it necessary.

Mr. HOAGLAND. The ideal situation would be one in which this was always a possibility and a meaningful one, and the form in which that is done is something we would be quite open to suggestion about. I think that putting it at a short period when it is going to come to its conclusion would terminate its effectiveness once we get to that date, then I think we would face the problem in these countries where private investment is not very likely.

In many situations the country has not been in business long enough to know quite what this amendment would do or how the guarantee program works. But our national interest in general would require that we maintain some forms of assistance in the country. The amendment we propose is designed to put us in that position.

Mr. ADAIR. Have you read the article from the Columbia Journal of Trans-National Law headed "Policy and Politics-U.S. Guaranty Program"?

Mr. HOAGLAND. Yes.

Mr. ADAIR. I don't want to go into that in detail. It is an interesting article. When we sit down to talk, I should like to discuss some of the matters set forth here.

Mr. HOAGLAND. All right, sir. I wish I had had a chance to talk to the young gentlemen who wrote it before they wrote it.

Mr. ADAIR. In reading that myself, and I suppose it came to all members of this committee, I think it must have been sent around to us, it came to my desk-in reading it myself, I discovered some ideas that I thought were somewhat novel at least. In response to a question addressed to you by Mrs. Bolton, I understood you to say that there has been a conversion of certain loans to grants.

Did you so answer her?

Mr. HOAGLAND. No, although that might be implied by my offer to furnish information about that for the record. I do not know the facts, Mr. Adair. I am offering to furnish them. I do not know whether such conversions have occurred or not.

Mr. ADAIR. Frankly I was a little surprised at your response. I, like you, Mrs. Bolton, am very interested in that reply.

Mr. HOAGLAND. I doubt very much that there have been. Yet I would not want to make that statement without checking the record. I think it would be very rare, but I have not looked to see whether there has been an instance of that kind.