Cuba Democracy Assistance:
USAID's Program Is Improved, but State Could Better Monitor Its Implementing Partners
GAO-13-285: Published: Jan 25, 2013. Publicly Released: Feb 7, 2013.
What GAO Found
The U.S. Agency for International Development (USAID) and Department of State (State) provide democracy assistance for Cuba aimed at developing civil society and promoting freedom of information. Typical program beneficiaries include Cuban community leaders, independent journalists, women, youths, and marginalized groups. USAID receives the majority of funding allocated for this assistance, although State has received 32 percent of funding since 2004. In recent years, both USAID and State have provided more funding for program implementation to for-profit and nongovernmental organizations (NGO) with a worldwide or regional focus than to universities and to NGOs that focus only on Cuba. All types of implementing partners, but worldwide or regional organizations in particular, used subpartners to implement program activities under 21 of the 29 awards and contracts that GAO reviewed.
USAID and State legal officials view the Cuba democracy programs authorizing legislation as allowing the agencies discretion in determining the types of activities that can be funded with program assistance. Agency officials added that the agencies ensure that program activities directly relate to democracy promotion as broadly illustrated in related program legislation. The officials stated that organizations are expected to work with agency program officers to determine what activities are permitted or appropriate. In addition, they said that program partners and subpartners are expected to spend U.S. government funds consistent with U.S. laws, and that requirements in primary award agreements generally flow down to any subpartners.
USAID has improved its performance and financial monitoring of implementing partners use of program funds by implementing new policies and hiring contractors to improve monitoring and evaluation and to conduct financial internal controls reviews, but GAO found gaps in States financial monitoring. While GAO found some gaps in implementing partners performance planning and reporting, both agencies are taking steps to improve performance monitoring. For financial monitoring, USAID performs financial internal controls reviews of its implementing partners with the assistance of an external auditor. Since 2008, USAID has used a risk-based approach to determine the coverage and frequency of the 30 reviews the auditor has conducted, which have identified weaknesses in implementing partners financial management, procurement, and internal controls. However, because of resource constraints, State did not perform financial internal controls reviews for more than two-thirds of its implementing partners during fiscal years 2010 through 2012. State procured an external financial auditor in September 2012 that plans to review more than half of States implementing partners, and has taken steps toward implementing a risk-based approach for scheduling these reviews. Federal regulations generally require agencies to approve the use of subpartners. GAO found that USAID issued specific guidance in 2011 to its implementing partners on requirements for subpartner approval. While State told GAO it has similar requirements, States requirements are not clearly specified in its written guidance. As a result, State was not provided with the information it would have needed to approve at least 91 subawards and subcontracts that were obligated under eight awards.
Why GAO Did This Study
Since 1996, Congress has appropriated $205 million to USAID and State to support democracy assistance for Cuba. Because of Cuban government restrictions, conditions in Cuba pose security risks to the implementing partnersprimarily NGOsand subpartners that provide U.S. assistance.
For this report, GAO (1) identified current assistance, implementing partners, subpartners, and beneficiaries; (2) reviewed USAIDs and States efforts to implement the program in accordance with U.S. laws and regulations and to address program risks; and (3) examined USAIDs and States monitoring of the use of program funds. This report is a publicly releasable version of a Sensitive But Unclassified Report that GAO issued in December 2012.
What GAO Recommends
GAO is recommending that State take steps to improve its financial monitoring of implementing partners and provide clear guidance for approving subpartners. State concurred with GAOs recommendations and cited steps they are taking to address them.
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Recommendations for Executive Action
Status: Closed - Implemented
Comments: State agreed with the findings in the GAO report and both bureaus responsible for managing the program have now taken steps to implement this recommendation. Specifically, in response to the recommendation, State's Bureau of Democracy, Human Rights, and Labor (DRL) -- responsible for managing the majority of State's Cuba democracy assistance program activities -- took steps to increase financial oversight of Cuba program partners, including utilizing a risk-based approach for program audits. For example, as of fiscal year 2015, DRL required organizations to submit a risk assessment as part of an award application. DRL also has used a risk-based approach for conducting audits and financial reviews through its external auditor since January 2013, which considers factors such as award amount, type of organization, and prior findings in determining the audit schedule. Since then, State's Bureau of Western Hemisphere Affairs (WHA)-- the other bureau responsible for the Cuba program -- provided documentation to support the additional steps that it has also taken to implement this recommendation. For example, between February 2015 and February 2016, WHA conducted site visits that included financial reviews of each of its grantees. In July 2015, WHA informed us that it had begun using a checklist that it developed for these monitoring visits with sections related to grantee internal controls, subgrantee administration, inventory, and travel and administrative costs, among other areas.
Recommendation: To strengthen State's ability to monitor the use of Cuba democracy program funds, and to enhance financial oversight, the Secretary of State should use a risk-based approach for program audits, including those conducted by an external auditor, that considers, among other factors, specific indicators--such as value of awards, prior deficiencies, oversight coverage, and frequency--for each of State's Cuba program partners.
Agency Affected: Department of State
Status: Closed - Implemented
Comments: State agreed with this recommendation and both bureaus responsible for the Cuba program - the Bureau of Democracy, Human Rights and Labor (DRL) and the Bureau of Western Hemisphere Affairs (WHA) - have taken actions to implement it. According to State officials, following issuance of our report, DRL and WHA informed their implementing partners at that time of the subpartner approval requirements. In addition, since fiscal year 2014, DRL and WHA have incorporated subpartner approval requirements into solicitations for new implementing partners, and have further clarified guidance to implementing partners at program conferences. DRL has monitored their implementing partners' adherence to this guidance through site visits conducted by an external auditor. WHA, which has had two implementing partners since fiscal year 2013, has approved subpartners through its proposal review process.
Recommendation: To strengthen State's ability to monitor the use of Cuba democracy program funds, and to obtain sufficient information to approve implementing partners' use of subpartners, the Secretary of State should provide clear guidance to implementing partners regarding requirements for approval of the use of subpartners, and monitor implementing partners to ensure that they adhere to these requirements.
Agency Affected: Department of State