Foreign Assistance:

U.S. Assistance for the West Bank and Gaza Strip

NSIAD-98-85R: Published: Feb 18, 1998. Publicly Released: Feb 18, 1998.

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Pursuant to a congressional request, GAO reviewed: (1) how U.S. assistance for the Palestinian Authority (PA) has been used; (2) what organizations have received U.S. funds; and (3) whether there is any evidence that U.S. funds had been misused.

GAO noted that: (1) Agency for International Development (AID) officials stated that to guard against the possibility of corruption in the administration of the West Bank and Gaza Strip assistance program, AID: (a) did not provide any funds directly to PA because, among other things, the new authority did not have acceptable financial and accounting procedures and practices in place; and (b) focused on a number of areas that AID could more readily monitor; (2) GAO's review of AID program documents confirmed that this has been the case; (3) during fiscal years 1994-1997, no AID funds were provided directly to PA; (4) most AID funds for the West Bank and Gaza Strip--$264.4 million or 97 percent--were obligated for specific projects implemented through U.S. contractors, private voluntary organizations, and government agencies or international organizations; (5) more than half of the AID funds were used for infrastructure projects such as improving access to water supplies and providing housing and schools; (6) the rest was provided for PA start-up costs and promoting democratic structures, expanding income opportunities, and implementing various other smaller programs; (7) not all AID funds were obligated for U.S. or international organizations; (8) however, in each case AID took precautions to ensure the funds were spent for intended purposes; (9) in fiscal year (FY) 1994, $5 million was provided for Palestine Liberation Organization police salaries; (10) to ensure proper accountability, AID hired an Egyptian audit firm to accompany the paymaster to verify individual payment records and to provide an overall accounting of disbursed funds; (11) in fiscal years 1994 and 1995, AID provided $2.6 million in grants to a Palestinian nongovernmental organization that, upon review, AID determined had claimed ineligible expenditures; (12) the grant was terminated; (13) in FY 1997, AID provided about $1.1 million to four other Palestinian nongovernmental organizations; (14) as a condition for receiving the grants, each agreed to monthly reviews by an independent accounting firm; (15) GAO's review of AID audits certain contracts for West Bank and Gaza Strip projects disclosed no other findings of corruption or misuse of U.S. funds, though some specific claims for reimbursement were questioned and resolved through AID's normal administrative processes; and (16) GAO reviewed two PA internal reports that were cited in press accounts as alleging that U.S. and other donor funds had been misused and found that these accounts were not accurate.

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