Updated January 25, 2023
U.S. Direct Financial Support for Ukraine
Background
not subject to the negotiated terms of the MDTF or PEACE
In 2022, Congress enacted four emergency supplemental
Fund.
funding measures to address the crisis caused by Russia’s
February 2022 invasion of Ukraine. These include the
The World Bank recently established a “Ukraine Relief,
March 2022 Ukraine Supplemental Appropriations Act,
Recovery, Reconstruction and Reform Trust Fund
2022 (FY2022 USAA, P.L. 117-103, Div. N); the May
(URTF)”; the United States has not funded that mechanism.
2022 Additional Ukraine Supplemental Appropriations Act,
2022 (FY2022 AUSAA, P.L. 117-128); the September
Congressional Oversight Measures
2022 Ukraine Supplemental Appropriations Act, 2023
Funds appropriated for direct financial support to Ukraine
(FY2023 USAA, P.L. 117-180, Div. B); and the December
are subject to a number of congressional oversight
2022 Additional Ukraine Supplemental Appropriations Act,
measures, including those in the laws described above;
2023 (FY2023 AUSAA, P.L. 117-328, Div. M). As of
annual Department of State, Foreign Operations and
January 1, 2023, Congress has appropriated a total of $113
Related Programs (SFOPS) appropriations; and the Foreign
billion in FY2022 and FY2023 in response to Russia’s war
Assistance Act of 1961, as amended (P.L. 87-195).
against Ukraine.
(Separate oversight provisions address funding provided
pursuant to other laws, particularly military assistance.)
To date, the U.S. Agency for International Development
(USAID) has obligated $22.9 billion of the appropriated
Section 507 of the FY2022 AUSAA, for example, sets
funding for direct financial support for the Government of
certain requirements specifically for direct financial support
Ukraine’s (GOU’s) central budget. The agency has
to Ukraine. Section 507(b) requires that such support be
provided such support via three World Bank mechanisms,
“subject to a memorandum of understanding [MOU] that
rather than bilaterally.
describes how the funds proposed to be made available will
be used and includes appropriate safeguards for
Figure 1. U.S. Direct Financial Support for the GOU
transparency and accountability.” The section also requires
that such funds be “maintained in a separate, auditable
account and may not be comingled with any other funds.”
Sections 507(c) and 507(d) establish notification and
reporting requirements, including reports to Congress
detailing “results achieved” by the financial support every
90 days. The FY2023 USAA shortens the timeline for
preparing the required reports to 45 days and requires that
Source: CRS, compiled from USAID and World Bank reporting.
such reports also include the “metrics established to
measure such results.” Congress received the most recent of
World Bank Mechanisms
such reports in December 2022.
The Multi-Donor Trust Fund for Ukraine (MDTF), a
World Bank Oversight Measures
mechanism established in March 2022 that is meant to
reduce procedural steps and transaction costs associated
As noted, the United States channels direct U.S. financial
with individual transfers by consolidating resources across
support to Ukraine through the World Bank. These funds
donors for transfer to Ukraine.
are subject to the World Bank’s Standard Conditions for
multi-donor trust funds; a bilateral U.S.-World Bank
The Public Expenditures for Administrative Capacity
Administration Agreement detailing obligations between
Endurance (PEACE) Fund, a mechanism established in
the parties; and an agreement between Ukraine and the
June 2022 meant to support the GOU’s ability to continue
World Bank detailing financing terms, scopes of activity,
compensating public employees. The initial scope included
requirements, and oversight standards.
government salaries (at the central and regional levels) and
school employees. It has since expanded to include local
The MDTF was created under a broader project framework
employees such as first responders and health care workers,
that predates the renewed onset of hostilities. Before
pensions, and other social services. The PEACE Fund may
withdrawal of funds, that framework requires that (1) the
also provide for grants to internally displaced persons.
World Bank affirm it is satisfied with the GOU’s
macroeconomic policy framework, and (2) that Ukraine
The “Transfer Out” MDTF, a mechanism specifically for
show progress toward carrying out reforms to land policy,
direct U.S. support to Ukraine established in July 2022. It is
pensions, inland waterways, and anti-corruption programs,
meant for the same purposes as the MDTF, but is intended
among others. The World Bank affirmed in November 2021
that Ukraine’s macroeconomic policy framework was
to allow a rapid, standalone U.S.-World Bank agreement
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U.S. Direct Financial Support for Ukraine
“adequate” for a loan to be issued and reaffirmed as much,
USAID Offices of Inspector General (OIGs) and the
conditional on substantial additional external financing, in
Government Accountability Office (GAO) in the FY2022
March 2022. The GOU must also retain records for all
USAA, FY2022 AUSAA, and FY2023 AUSAA. In the
expenditures until two years after an applicable project’s
James M. Inhofe National Defense Authorization Act for
closing date. World Bank representatives and, with World
Fiscal Year 2023 (P.L. 117-263), Congress required a
Bank authorization, donors are entitled to visit sites
report from the OIGs on their oversight framework with
financed under the project and to examine documents
respect to U.S. assistance to Ukraine (§1247(b)). The OIGs
related to grant obligations.
released that report, entitled the Joint Strategic Oversight
Plan for Ukraine Response, on January 19, 2023.
Unlike the MDTF, PEACE Fund disbursements do not
require a prior affirmation of macroeconomic policy
Some Members previously raised concerns that the
framework sustainability, nor are they tied to a set of
supplemental funds for Ukraine did not have adequate
reform commitments. Funding is authorized for nonmilitary
oversight. During consideration of the FY2022 AUSAA,
government and school staff salaries through the general
two Senators proposed amendments to the measure seeking
budget of Ukraine, and the project maintains a results
to address this through the creation of a special inspector
framework to track key targets for on-time payment of
general (S.Amdt. 5040, S.Amdt. 5041); Congress did not
government obligations—to include salaries, pensions, and
adopt either amendment. In the FY2023 USAA, Congress
school operations. The PEACE agreement requires the
included a provision that directed the Inspectors General to
GOU to draft and execute a Project Operations Manual
submit a report “detailing and assessing the mechanisms for
acceptable to the World Bank, detailing administrative,
monitoring and safeguards” of the funds for direct financial
financial, and operational policies for the agreement. The
support for Ukraine within 45 days of the funds being
agreement also requires Ukraine’s Deputy Minister of
obligated. The USAID OIG published the special report on
Finance, the designated project coordinator, to provide a
January 5, 2023. The FY2023 AUSAA included a provision
semiannual project report to the Bank.
that directed the Inspectors General to submit a report
within 90 days of enactment of the act on their oversight
CRS has not identified public information on the Transfer
plans and initial findings. Members may review the reports
Out fund’s oversight structure. CRS does not have access to
produced thus far and seek to determine whether OIG and
the World Bank’s Standard Conditions.
GAO oversight of U.S. direct financial support for Ukraine
is sufficient and properly focused.
Issues for Congress
Minimum Standards for U.S. Government-to-
As the war in Ukraine continues, the 118th Congress may
Government Assistance. Regular foreign operations
consider the following issues related to U.S. direct financial
appropriations set minimum conditions for all recipients of
support for the GOU.
government-to-government assistance, though countries
may still receive assistance with mitigating safeguards.
Congressional Oversight. Certain notifications and
While the State Department determined that Ukraine did
reports—mandated in annual SFOPS legislation and the
not meet nor progress toward its minimum fiscal
four emergency supplemental measures—are required to be
transparency standards in FY2022, the supplemental
submitted to only the Committees on Appropriations.
measures are subject to a separate determination for
Congressional interest in the war in Ukraine and U.S.
accountability and anti-corruption safeguards. As the
support for the GOU is broad, indicating engagement
conflict continues, Congress may assess Ukraine’s efforts
among Members who do not sit on the Appropriations
on financial transparency reforms in the midst of war.
Committees. Lawmakers may consider expanding
Congress may also assess how Ukraine’s current
distribution of certain notifications and reports to enhance
management obligations compare with requirements in U.S.
oversight and understanding of funding for Ukraine among
loan guarantees provided to Ukraine in 2014-2016, as well
Members not serving on those committees.
as U.S. budget support provided to other countries.
Accountability Through the World Bank. The United
Financing Structure. To date, U.S. direct financial support
States typically requires periodic reporting by the World
has been provided via World Bank mechanisms. The World
Bank on multi-donor trust funds. The mechanisms
Bank promotes its role as providing faster delivery, greater
themselves, however, are established and monitored by the
implementation capacity, and pooling of funds from
World Bank, which may reduce U.S. capacity to shape
multiple donors. Congress mandated a U.S.-Ukraine MOU
oversight. Congress may analyze the U.S.-Ukraine MOU
to set transparency and accountability standards, and
for results achieved and evaluate the extent to which World
USAID is assisting with MOU aims. Congress may
Bank targets comport with U.S. priorities for the GOU.
consider whether future funding should leverage World
Members also may examine the extent to which U.S.
Bank mechanisms. Congress may evaluate U.S.-Ukraine
representatives have participated in World Bank inspections
bilateral financing as an alternative, which could reflect
and audits to affirm appropriate use of funds. Given past
U.S. priorities more directly. Members may also evaluate
reports of corruption in Ukraine, Congress may also address
whether USAID is supporting MOU aims adequately.
whether such financing could contribute, directly or

indirectly, to incidents of waste, fraud, or abuse.
Emily M. McCabe, Analyst in Foreign Assistance and
Inspector General Oversight. Congress appropriated
Foreign Policy
supplemental funding for the Department of State and
Nick M. Brown, Analyst Foreign Assistance
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U.S. Direct Financial Support for Ukraine

IF12305


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https://crsreports.congress.gov | IF12305 · VERSION 2 · UPDATED

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