Promoting Democracy:

National Endowment for Democracy's Management of Grants Needs Improvement

NSIAD-91-162: Published: Mar 14, 1991. Publicly Released: Mar 14, 1991.

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GAO reviewed the National Endowment for Democracy's programs and operations, focusing on the Endowment's: (1) evaluations and reports of program effectiveness and results; (2) grantees' compliance with financial controls and administrative procedures; and (3) Board of Directors' role in providing oversight and direction over Endowment activities.

GAO found that: (1) the Endowment successfully developed an expanding worldwide grants program but did not give adequate attention to systematically planning program objectives and assessing program results; (2) most core grantees did not provide final evaluations of their overall annual grants and did not use evaluations to establish future plans; (3) discretionary grantees did not successfully implement Endowment evaluation procedures; (4) Endowment staff had not increased their capability to evaluate and verify results of grant programs; (5) the Endowment's Board of Directors did not actively monitor Endowment evaluation and oversight of grantee programs; (6) grantees and foreign subrecipients did not comply with key Endowment financial and internal controls; (7) foreign subrecipients' noncompliance with financial controls resulted in commingling and misuse of Endowment funds, and questionable use of administrative funds; and (8) Endowment procedures did not ensure grantee compliance because of insufficient progress reports and audit coverage.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In response to the recommendation, the Endowment has made OMB A-133 requirements for all of its grantees. However, it still has not reached agreement with USIA on how A-133 should be applied to its foreign subrecipients. No further action is anticipated, so the recommendation should be closed. The Endowment has instituted an audit provision in its grant agreement in accordance with OMB A-133. It continues to work with USIA to develop a plan and strategy for conducting reviews and audits of foreign subrecipients. The Endowment is working with USIA to develop an alternative to A-133 that increases the threshold requirement of the foreign subrecipients to grants greater than $100,000.

    Recommendation: The Endowment is responsible to USIA for compliance with procedures to ensure that grant funds are used for purposes intended by the enacting legislation. USIA should ensure that the Endowment's Board of Directors develops a detailed plan and strategy for conducting reviews and audits of core and discretionary grantee administrative costs and monitoring and verifying compliance by foreign subrecipients.

    Agency Affected: United States Information Agency

  2. Status: Closed - Implemented

    Comments: The Endowment modified quarterly progress reports to include questions about whether separate accounts are being maintained or interest is being earned. The Endowment is also requiring grantees and foreign subrecipients to provide verification that grant funds are being maintained in separate bank accounts.

    Recommendation: The Endowment is responsible to USIA for compliance with procedures to ensure that grant funds are used for purposes intended by the enacting legislation. USIA should ensure that the Endowment's Board of Directors requires progress reports to include more detailed information that will enable the Endowment to better monitor compliance with financial controls.

    Agency Affected: United States Information Agency

  3. Status: Closed - Implemented

    Comments: In March 1992, the Endowment's Board of Directors approved a strategy for independent program evaluation. Each year, the Endowment will earmark funds for independent evaluation and develop an annual plan that will select projects to be examined, and the purpose and scope of each evaluation. During 1992, NED hired consultants to conduct independent evaluations of projects NED funded.

    Recommendation: The Endowment is responsible to USIA for compliance with procedures to ensure that grant funds are used for purposes intended by the enacting legislation. USIA should ensure that the Endowment's Board of Directors improves its capability to evaluate and report on the effectiveness of the Endowment by establishing a capability to: (1) independently evaluate selected core and discretionary grantee programs; (2) assist grantees to develop more specific and measurable evaluation objectives; and (3) review grantees' and subrecipients' compliance with evaluation procedures.

    Agency Affected: United States Information Agency

  4. Status: Closed - Implemented

    Comments: In its 1991 annual report, the Endowment reported on the degree to which it was successful in allocating resources as planned in its annual priorities documents, and include analyses of individual projects' accomplishments and multi-project evaluations of completed projects with similar characteristics.

    Recommendation: The Endowment is responsible to USIA for compliance with procedures to ensure that grant funds are used for purposes intended by the enacting legislation. USIA should ensure that the Endowment's Board of Directors improves its capability to evaluate and report on the effectiveness of the Endowment by including in annual reports to Congress an assessment of Endowment program results for the past year based on Endowment goals and priorities.

    Agency Affected: United States Information Agency

  5. Status: Closed - Implemented

    Comments: The Endowment's Board of Directors established an evaluation committee. In August 1991, the Board established a subcommittee to help develop a broad strategic plan and a new annual priorities document for 1992. The strategic plan and new annual priorities document were completed and approved by the board on January 17, 1992. The priorities document identified goals, priorities, and budget targets.

    Recommendation: The Endowment is responsible to the U.S. Information Agency (USIA) for compliance with procedures to ensure that grant funds are used for purposes intended by the enacting legislation. USIA should ensure that the Endowment's Board of Directors improves its capability to evaluate and report on the effectiveness of the Endowment by identifying more specific and measurable goals and priorities, including specific budget targets for individual regions and countries.

    Agency Affected: United States Information Agency

  6. Status: Closed - Implemented

    Comments: The Endowment revised its grant agreement to require that grantees conduct audits in accordance with OMB A-133 guidance. This guidance requires grantees to audit foreign subgrantees. The revised grant agreement also required verification of separate bank accounts for the grantee and subgrantees. The Endowment developed a model subgrantee agreement for core and other U.S. grantees to use.

    Recommendation: The Endowment is responsible to USIA for compliance with procedures to ensure that grant funds are used for purposes intended by the enacting legislation. USIA should ensure that the Endowment's Board of Directors revises grant agreements to: (1) explicitly require independent financial audits of foreign recipients, including tests of compliance with grant terms and conditions; and (2) clarify foreign subrecipients' responsibilities for complying with financial controls.

    Agency Affected: United States Information Agency

 

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