For decades, the United States has worked toward the resolution of the Israeli-Palestinian conflict, most recently under the 2003 Roadmap for Peace, which calls for an independent Palestinian state coexisting peacefully with the State of Israel. Since fiscal year 1993, the United States has provided more than $2.2 billion in assistance to the West Bank and Gaza to support the Middle East peace process and encourage progress in reforming the Palestinian Authority. In fiscal years 2005 and 2006 alone, the United States provided over $420 million in Economic Support Funds for the West Bank and Gaza; this funding is primarily administered by the U.S. Agency for International Development (USAID). In the conference report accompanying the 2005 supplemental appropriation legislation, the Congress directed that the assistance be allocated to two broad development categories--economic revitalization and infrastructure development--each with five subcategories. In January 2006, Hamas--designated a terrorist organization by the United States and others--won a majority of the seats in the Palestinian parliament. On January 30, 2006, the United Nations (UN), the United States, the European Union, and Russia--known as the Quartet on the Middle East--stated that they would provide support and assistance to the Hamas-led government only if it agreed to nonviolence, to recognize the State of Israel, and to respect previous Israeli-Palestinian peace agreements. In June 2006, the Congress directed that the Department of State (State) submit a new assistance plan. For fiscal years 2005 and 2006, the Congress mandated that the Comptroller General of the United States report to the Congress on U.S. assistance to the West Bank and Gaza. In response to this mandate, we reported in September 2006 on the steps USAID had taken to help ensure that U.S. assistance did not support terrorist activities in the West Bank and Gaza. In this report, also in response to the mandate, we examine the status of (1) USAID's obligations and expenditure of the fiscal years 2005 and 2006 appropriations for the West Bank and Gaza and (2) the fiscal year 2005 supplemental appropriation in greater detail to determine whether USAID allocated the funds in accordance with congressional guidance.
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