Foreign Assistance:

Recent Improvements Made, but USAID Should Do More to Help Ensure Aid Is Not Provided for Terrorist Activities in West Bank and Gaza

GAO-06-1062R: Published: Sep 29, 2006. Publicly Released: Sep 29, 2006.

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The United States has worked for decades to achieve a resolution to the Israeli-Palestinian conflict through initiatives such as the 1993 Oslo Accords and the more recent 2003 Roadmap for Peace. During fiscal years 1993 through 2005, the United States provided more than $2 billion in assistance to Palestinians in the West Bank and Gaza, including nearly $275 million in fiscal year 2005, to help achieve this goal. In particular, the 2005 assistance was provided to support the president of the Palestinian Authority, elected in January 2005, and to facilitate the Israeli disengagement from parts of the West Bank and Gaza, among other things. This assistance, primarily administered by the U.S. Agency for International Development (USAID), has been directed mainly toward five development sectors: economic growth, water and infrastructure, democracy and governance, health, and higher education. In recent years, the United States has taken several steps to help ensure that U.S. resources, including its aid to the West Bank and Gaza, do not support terrorist activities. On September 23, 2001, President Bush issued an executive order prohibiting the support of any organization or individuals that have been designated as terrorists. Since 2001, to implement the executive order and other antiterrorism provisions in various subsequent appropriations acts, USAID, in consultation with the Department of State, Congress, and others, developed a number of provisions to help ensure that its assistance is not delivered to or through terrorists. In addition, the USAID mission for the West Bank and Gaza (the mission) developed policies and procedures to implement antiterrorism provisions for the awards it administers. The provisions that were in effect for assistance delivered through contracts, grants, and cooperative agreements active in 2005 included (1) the vetting of certain non-U.S. prime awardees and subawardees for terrorist connections; (2) certifications by all prime awardees and subawardees of grants and cooperative agreements that they have not assisted and do not assist terrorists; and (3) a clause in all awards and related subawards prohibiting the support of terrorists (antiterrorism clause) and clauses in all prime awards prohibiting (a) the use of U.S. funds to recognize or honor terrorists (naming clause) and (b) the provision of cash to the Palestinian Authority (cash clause). Responding to a 2005 mandate to the Comptroller General of the United States, we examined fiscal year 2005 assistance to the West Bank and Gaza to, among other things, ensure that the required antiterrorism measures were implemented. In addition, we reviewed the financial audit reports of West Bank and Gaza contractors and grantees (and significant subcontractors and subgrantees) prepared by the USAID Office of the Regional Inspector General-Cairo (RIG) in response to a 2003 mandate and subsequent mandates. Among other things, the audits examined the awardees' compliance with antiterrorism provisions. To address these objectives, we reviewed the relevant laws and executive orders and USAID's directives, internal memorandums, operating procedures, and guidance for assistance-related antiterrorism measures. We focused on USAID's implementation of procedures related to vetting and antiterrorism certification and clauses.

The mission's implementation of its antiterrorism requirements for vetting, certification, and clauses for awards active in fiscal year 2005 had certain limitations. However, the mission has taken, or is taking steps, to resolve many of these problems. Until June 2006, the mission did not routinely collect detailed identifying information on individuals, such as date and place of birth, or verify that information. Further, we found that the mission had not established procedures, such as requesting some form of identification, to verify the accuracy of key individuals' names provided by awardees. In addition, in March 2006, although the mission added certain conditions that would trigger revetting of awardees, the mission eliminated a requirement to periodically revet certain awardees, thus reducing the chances of identifying terrorist connections with more recent intelligence information. Data reliability issues, security weaknesses, and other problems with the mission's unclassified database, which is designed to record and track vetting results, limited it's utility for management and oversight purposes. Although the mission generally ensured that prime awardees signed the required certifications, many prime awards did not contain the required clauses and, until recently, the mission did not systematically verify that recipients of subawards signed the required certifications or that subawards contained the mandatory clauses. To address the 2003 mandate and subsequent related mandates for financial audits of West Bank and Gaza assistance, USAID's RIG contracted with audit firms in the region. The RIG added the requirement for reviewing antiterrorism provisions to its audits in supplementary guidance in 2003. Since then, the RIG has prepared 62 reports, issued from 2004 through 2006, based on the contract auditors' reviews. However, although the mandate was addressed, the RIG's financial audits did not help the mission ensure that awardees complied with the antiterrorism requirements before awards and subawards were entered into. In addition, the guidance to the RIG's contract auditors did not always reflect the mission's antiterrorism policies and procedures. The October 2003 guidance provided that all subawards should be examined rather than a sample. However, this requirement was not in the guidance to auditors for 2004 and 2005. Unless the auditors were otherwise aware of the 2003 guidance, they may not have reviewed all subawards. We are making several recommendations to the Director of U.S. Foreign Assistance and USAID Administrator to strengthen the mission's efforts to help ensure that U.S. assistance to the West Bank and Gaza does not support terrorist activities, including addressing limitations with the mission's vetting management database and developing antiterrorism policies and procedures for all its financial agreements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In the September 2006 report entitled Foreign Assistance: Recent Improvements Made, but USAID Should Do More to Help Ensure Aid Is Not Provided for Terrorist Activities in West Bank and Gaza (GAO-06-1062R), GAO stated that although USAID had established antiterrorism provisions that apply to contracts, cooperative agreements, and grants, it had not clearly articulated how antiterrorism provisions apply to other types of assistance mechanisms such as purchase orders. GAO recommended that USAID develop policies and procedures that address how each of its antiterrorism provisions applies to other types of assistance instruments including consulting agreements, letters of understanding, memorandums of understanding, and purchase orders. In October 2007, the USAID's West Bank and Gaza mission issued revisions to its mission order pertaining to antiterrorism procedures (Mission Order 21). The revised mission order and related contractor notices and information memoranda define how USAID's antiterrorism provisions apply to other types of assistance instruments.

    Recommendation: To help ensure that U.S. assistance to West Bank and Gaza does not support terrorist activity, the Director of U.S. Foreign Assistance and USAID Administrator should direct the mission to develop policies and procedures that address how each antiterrorism provision applies to consulting agreements, letters of understanding, memorandums of understanding, and purchase orders.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: In the September 2006 report entitled Foreign Assistance: Recent Improvements Made, but USAID Should Do More to Help Ensure Aid Is Not Provided for Terrorist Activities in West Bank and Gaza (GAO-06-1062R), GAO recommended that USAID ensure that the cash clause is included in all sub-awards before they are initiated. In commenting on the final report, USAID stated that it had accepted GAO's recommendation. Since December 2006, USAID's West Bank and Gaza mission has required that the cash clause be included in all sub-awards and that prime awardees provide USAID with a copy of the cash clause as it appears in each sub-award.

    Recommendation: To help ensure that U.S. assistance to West Bank and Gaza does not support terrorist activity, the Director of U.S. Foreign Assistance and USAID Administrator should direct the mission to ensure that the cash clause is included in all subawards before they are initiated.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: In the September 2006 report entitled Foreign Assistance: Recent Improvements Made, but USAID Should Do More to Help Ensure Aid Is Not Provided for Terrorist Activities in West Bank and Gaza (GAO-06-1062R), GAO recommended that USAID ensure that the West bank and Gaza mission's vetting management database promotes data reliability, satisfies technical documentation requirements, and meets all applicable security requirements. In late 2006, USAID developed a new vetting tracking system. The system became operational in November 2006, was developed by a U.S. contractor, is resident at USAID headquarters in Washington, D.C., has access and data entry controls, and is supported by documentation including a user manual. Consequently, the data reliability, documentation, and security flaws present in the old system have been eliminated.

    Recommendation: To help ensure that U.S. assistance to West Bank and Gaza does not support terrorist activity, the Director of U.S. Foreign Assistance and USAID Administrator should direct the mission to ensure that the mission's vetting management database promotes data reliability, satisfies technical documentation requirements, and meets all applicable security requirements.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: In the September 2006 report entitled Foreign Assistance: Recent Improvements Made, but USAID Should Do More to Help Ensure Aid Is Not Provided for Terrorist Activities in West Bank and Gaza (GAO-06-1062R), GAO recommended that USAID verify the identification information that it collects and uses to vet entities that implement projects in West Bank and Gaza, such as birth date, by requiring Israeli identification cards or some other form of government-issued ID, and that it rescind its decision to eliminate periodic revetting. Prior to GAO's 2006 engagement pertaining to USAID efforts in West Bank and Gaza, USAID did not collect complete and comprehensive identification information needed to vet entities that implement projects in West Bank and Gaza. For example, USAID only collected and provided to vetting officials an individual's 4-part Arabic name. In mid-2006, as a result of GAO's fieldwork in February 2006, USAID began requiring that more detailed information (e.g., name, ID number, and place and Date of birth) from the entities it vets. In addition, USAID now requires that the identification information provided by these entities come from a government-issued photo ID, such as a passport. In addition, contractors, grantees, and other recipients must certify that reasonable steps (in accordance with sound business practices) were taken to verify the information submitted. Finally, In its comments on the report, USAID stated that, as a result of our review, it has reinstated a periodic revetting requirement. These requirements are codified in an update to USAID West Bank and Gaza Mission Order 21 published on October 5, 2007.

    Recommendation: To help ensure that U.S. assistance to West Bank and Gaza does not support terrorist activity, the Director of U.S. Foreign Assistance and USAID Administrator should direct the mission to consider (1) verifying the identifying data it collects for vetting, such as date of birth, by requiring Israeli identification cards or some other form of identification and (2) rescinding its decision to eliminate periodic revetting of awardees.

    Agency Affected: United States Agency for International Development

  5. Status: Closed - Implemented

    Comments: In the September 2006 report entitled Foreign Assistance: Recent Improvements Made, but USAID Should Do More to Help Ensure Aid Is Not Provided for Terrorist Activities in West Bank and Gaza (GAO-06-1062R), GAO reported that USAID's antiterrorism provisions (vetting, certifications, and contract clauses) are designed to be implemented prior to the implementation of assistance/financial instruments (i.e., grants, contracts, etc.). GAO found that in some cases, USAID implemented assistance instruments prior to implementing its antiterrorism provisions. For example, antiterrorism certifications were not signed for some subawards and clauses were not included in some prime award and subaward assistance contracts. GAO recommended that USAID, in cooperation with USAID's Inspector General, develop a review and reporting system to ensure that antiterrorism provisions are implemented before assistance instruments are implemented. In October 2006, USAID revised its procedures and began requiring implementing partners to provide documentation to verify that required clauses and certifications were included in awards prior to implementation. In late 2006, the Office of the Inspector General and USAID West Bank and Gaza Mission management met to discuss the mission's efforts to implement GAO's recommendation. In October 2007, USAID's West Bank and Gaza Mission issued a revised version of its antiterrorism provision mission order (Mission Order 21) and a related mission notice to implementing partners. The revised order requires entities that implement USAID assistance projects to submit to USAID required vetting information, signed certifications, and the pages from assistance instruments containing the required clauses prior to implementing assistance instruments. In December 2007, the Inspector General issued a report that examined, among other things, the mission's efforts to develop a new system to ensure that antiterrorism provisions are implemented prior to the execution of assistance instruments. The Inspector General made recommendations to further improve the mission's systems. According to the Inspector General's report, the recommendations were implemented.

    Recommendation: The Director of U.S. Foreign Assistance and USAID Administrator and the West Bank and Gaza mission should, in cooperation with USAID's Office of the Regional Inspector General-Cairo, develop a review and reporting system other than USAID's financial audits to help ensure that the requirements for vetting, certifications, and clauses for each award and applicable subawards are met before the financial agreements are implemented. This system should also ensure that the reviews (1) reflect applicable West Bank and Gaza mission policies and procedures for vetting, certification, and clauses at the time of the awards; and (2) have a clear and consistent audit methodology for examining subawards.

    Agency Affected: United States Agency for International Development

 

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