Enterprise Funds

Evolving Models for Private Sector Development in Central and Eastern Europe Gao ID: NSIAD-94-77 March 9, 1994

Enterprise funds are an experimental way of delivering aid to the private sectors in Central and Eastern European countries making the transition from centrally planned to market-oriented economies. The enterprise funds are private U.S. corporations authorized by Congress and staffed by experienced business managers. Authorized funding for the first four funds, which involve Poland, Hungary, the former Czech and Slovak Republics, and Bulgaria, totals about $440 million. Federal contributions to enterprise funds represented about 28 percent of all budgeted U.S. assistance for the region between fiscal years 1990 and 1993. This report reviews the first four enterprise funds' (1) investment and program strategies and plans for sustainability, (2) overall performance, (3) management practices, and (4) oversight by U.S. government agencies.

GAO found that: (1) the four funds use a variety of investment approaches tailored to the economic condition of and business opportunities in each country; (2) the Polish and Hungarian funds can invest in businesses with some experience, while the Hungarian and Czech and Slovak funds mostly invest in start-up businesses; (3) all of the funds have or are developing small business loan programs in affiliation with local banks, and most of the funds grant larger loans directly; (4) the funds are seeking to become self-sustaining by attracting other investors and increasing their earnings, asset sales, and management fees; (5) the funds' investments have created jobs, increased nationals' business experience, and become an information resource for other investors; (6) the funds' strategies for asset disposal include sale to current owners and outside investors and sale to the general public through a stock exchange; (7) the funds' disbursement of technical assistance grants has varied, but most are planning to concentrate technical assistance on projects in which they have invested; (8) because of the countries' evolving economies, the funds have had such problems as inaccurate investee financial statements, inadequate investment agreements and audits, unethical business practices, and management and organizational problems; (9) the funds are exempt from most U.S. assistance oversight regulations; and (10) the funds and U.S. agencies are working to improve the funds' financial controls and oversight.



The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.