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 ID: GAO-06-1062R September 29, 2006The 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.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-06-1062R, 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
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September 29, 2006:
The Honorable Mitch McConnell:
Chairman:
The Honorable Patrick J. Leahy:
Ranking Minority Member:
Subcommittee on State, Foreign Operations,and Related Programs:
Committee on Appropriations:
United States Senate:
The Honorable Jim Kolbe:
Chairman:
The Honorable Nita M. Lowey:
Ranking Minority Member:
Subcommittee on Foreign Operations,Export Financing, and Related
Programs:
Committee on Appropriations:
House of Representatives:
Subject: 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:
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
organizations or individuals that have been designated as
terrorists.[Footnote 1] Since 2001, to implement the executive order
and other antiterrorism provisions in various subsequent appropriations
acts,[Footnote 2] 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[Footnote 3] 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.[Footnote 4] 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.[Footnote 5] 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. We developed a
database of USAID West Bank and Gaza awards to capture and summarize
their characteristics and requirements. We traveled to Tel Aviv,
Israel, and met with cognizant West Bank and Gaza mission officials,
including the USAID Mission Director and his senior staff. We examined
an unclassified USAID West Bank and Gaza mission database designed to
help the mission manage its vetting, and we analyzed 99 USAID
contracts, grants, and cooperative agreements and over 900 related
subawards that were associated with awards active during 2005 to
determine whether they had the required certifications and clauses. We
also met with the mission's staff responsible for overseeing the
various awards and related subawards. In addition, we traveled to
Cairo, Egypt, and met with USAID officials at the RIG and reviewed and
analyzed the contents of 62 audit reports that it had completed, which
addressed West Bank and Gaza assistance for awards active from 2002
through 2005 (with corresponding reports issued from 2004 through
2006). We conducted our review from October 2005 through August 2006 in
accordance with generally accepted government auditing standards. (For
further details of our scope and methodology, see enc. I.)
Results in Brief:
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. Approximately 94 percent of the
vetting results memorandums indicated that additional information, such
as an individual's date and place of birth and an Israeli
identification number, was needed for a more complete assessment.
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.[Footnote 6] The mission
drafted a policy in June 2006 to collect additional identifying
information and in its comments stated that it would take action to
improve its ability to verify the information 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. However, in its comments on a draft of this
report it agreed with our recommendation and has reinstituted the
periodic revetting requirement.
* Data reliability issues, security weaknesses, and other problems with
the mission's unclassified database, which is designed to record and
track vetting results, limited its utility for management and oversight
purposes. We found important data fields that were left blank or filled
with inappropriate information. Also, a foreign service national
developed the database counter to State internal regulations, and few
safeguards were in place to control access to hard copies of the
information stored in the database. In April 2006, a USAID team of
information specialists began addressing these problems, and cognizant
USAID officials told us they expect to have a more useful and secure
unclassified vetting management database in operation later this year.
* 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. In some cases, the required
clauses did not appear or had been added months or years after award
initiation, including after our inquiry. Consequently, some prime
awardees and subawardees may not have been aware of their contractual
obligations to comply with certain antiterrorism provisions. In
response to our observations, the mission revised its policy in March
2006 to require that before award approval, all prime awardees submit
subawardee certifications as well as evidence that the required clauses
were included in the subawards. The mission has not, however, clearly
articulated how its antiterrorism provisions are applied to assistance
agreements such as memorandums of understanding and consulting
agreements, and as a result, it has applied these provisions
inconsistently.
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.[Footnote 7] 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 particular, the nature of the RIG's financial audits
means the audits were not initiated until after the award had been
implemented or, in some cases, completed. This means that any omissions
in conducting the required vetting or ensuring that the antiterrorism
certifications and clauses were in the awards, as required, were not
found by the auditors until after the award had been entered into. In
addition,
* The guidance to the RIG's contract auditors did not always reflect
the mission's antiterrorism policies and procedures. For example, the
2003, 2004, and 2005 guidance directed auditors to check for a less
detailed version of the antiterrorism clause than the mission was
using.
* 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. We also
recommend that the Director of U.S. Foreign Assistance and USAID
Administrator and the West Bank and Gaza mission, in cooperation with
the RIG, develop a system to review awards and applicable subawards to
help ensure that antiterrorism requirements are met before the
financial agreements are implemented. This system should also ensure
that the reviews (1) reflect the mission's policies and procedures at
the time of the award and (2) have a consistent methodology for
examining subawards.
In commenting on a draft of this report, USAID and the USAID Inspector
General generally accepted four of our five recommendations. USAID
noted that our fieldwork and the draft report were a positive
contribution to improving and strengthening the West Bank and Gaza
mission's antiterrorism provisions. However, the mission disagreed on
our recommendation on the need to develop policies and procedures for
applying antiterrorism provisions to other assistance agreements, such
as memorandums of understanding and purchase orders. Although the
mission added guidance regarding in-kind assistance to its mission
order, USAID commented that further clarification for applying
antiterrorism provisions to other assistance agreements such as
memorandums of understanding was not needed. We believe that further
clarification is needed in the mission order to ensure that
antiterrorism provisions are correctly and consistently applied to all
agreements. In addition, USAID noted that the mission has taken steps
that address the intent of our recommendation to ensure compliance with
antiterrorism provisions before awards and subawards are implemented.
Background:
The Palestinian territories, comprising the West Bank and Gaza, cover
2,402 square miles and have a combined population of 3.8 million
people.[Footnote 8] Gaza is administered by the Palestinian Authority,
while the West Bank includes areas administered by the authority and
Israel. (See fig. 1.)
Figure 1: Map of West Bank and Gaza and Surrounding Countries:
[See PDF for Image]
Sources: GAO (data); Map Resources (map) and CIA World Factbook.
[End of Figure]
In 1993, the Oslo Peace Accords[Footnote 9] were signed and USAID
established its West Bank and Gaza mission in Tel Aviv. In September
2000, the second intifada (uprising) began and the Oslo peace process
unraveled. Peace efforts were renewed in June 2002 when President
George W. Bush outlined the principles that served as the foundation
for a performance-based strategy called the Roadmap for Peace, which
calls for an independent Palestinian state coexisting peacefully with
the State of Israel. The United Nations (UN), the United States, the
European Union, and Russia--known as the Quartet on the Middle
East[Footnote 10]--as well as Israel and the Palestinian Authority
endorsed the strategy in April 2003. In January 2005, Mahmoud Abbas, a
supporter of the peace strategy, was elected president of the
Palestinian Authority. A year later, in January 2006, the Palestinian
people elected a Hamas majority to the Palestinian Legislative Council.
Hamas is designated as a terrorist organization by Israel, the United
States, and the European Union. On January 30, 2006, the Quartet on the
Middle East stated that its members would only provide support and
assistance to the Hamas-led government if the government would agree to
nonviolence, recognize the state of Israel, and respect previous
Israeli-Palestinian peace agreements. As of September 2006, Hamas had
not accepted these conditions.
Since 1993, the United States has provided more than $2 billion to the
West Bank and Gaza to support the Middle East peace process and
encourage progress in reforming the Palestinian Authority.[Footnote 11]
The 2005 appropriation of $274.4 million--the largest yearly amount of
U.S. bilateral assistance for the West Bank and Gaza since the second
intifada--was provided to, among other things, support the president of
the Palestinian Authority, elected in January 2005, and to facilitate
the Israeli disengagement from Gaza and four northern West Bank
settlements. As of June 30, 2006, the West Bank and Gaza mission
reported that it had obligated $222.9 million in Economic Support Fund
assistance[Footnote 12] through various financial agreements active
during fiscal year 2005 and had expended $60.8 million. For fiscal year
2006, USAID reported that it had obligated just $1.1 million and
expended only $139,000--reflecting the fact that U.S. assistance to the
West Bank and Gaza has been frozen pending a comprehensive review. In
April 2006, the Secretary of State announced a substantial reduction in
assistance and redirected $300 million to humanitarian, democracy
promotion, and civil society activities. In June 2006, concerned that
Hamas' influence was growing, the Congress directed that none of the
funds appropriated under the Economic Support Fund in 2006 or any prior
appropriation for foreign operations, export financing, and related
programs may be obligated for assistance to the West Bank and Gaza
until the Secretary of State reports to the Committees on
Appropriations how the funds will be spent and that appropriate
measures are in place to ensure that no funds will support terrorist
activities.[Footnote 13] On July 21, 2006, the Secretary of State
submitted the report to the committees. The report included a revised
strategy that provided details on an assistance package totaling $468
million.[Footnote 14]
Since establishing its mission in the West Bank and Gaza in September
1993, USAID has directed assistance to the Palestinians toward five
main development sectors: economic growth, water and infrastructure,
democracy and governance, health, and higher education. It has
supported these objectives through efforts such as, respectively, job
creation programs, construction of reservoirs and roads, election
support projects, projects to improve maternal and child health, and
university scholarship programs. As a result of Hamas' election victory
in January 2006, the terrorist organization's unwillingness to accept
the conditions set by the Quartet, and continued attacks on Israel by
Hamas' military wing, USAID reduced and redirected its overall
assistance program and focused its assistance primarily on democracy
support, health, education, and private sector development activities
that would not provide political or economic gain to, or require
contact with, the Hamas-led Palestinian Authority.
U.S. policy to prevent assistance from supporting known terrorists in
the West Bank and Gaza is articulated in a 2001 executive order and
several appropriations laws:
* Executive Order 13224, issued in September 2001, blocks property and
prohibits transactions with persons who commit, threaten to commit, or
support terrorism.[Footnote 15]
* The Consolidated Appropriations Acts of 2003, 2004, and 2005
[Footnote 16] require that before obligating assistance under the
Economic Support Fund for the West Bank and Gaza, the Secretary of
State must establish vetting procedures to ensure that U.S. assistance
is not provided to or through any individual, entity, or institution
associated with terrorist activity. The 2005 law also prohibits the
obligation of assistance under the Economic Support Fund to recognize
or honor individuals who commit, or have committed, acts of
terrorism.[Footnote 17] In addition, the laws require that the USAID
Administrator ensure that annual audits of all West Bank and Gaza
contractors and grantees and significant subcontractors and subgrantees
are conducted to, among other things, ensure compliance with the
antiterrorism provisions contained in the acts.[Footnote 18]
To implement Executive Order 13224 and the antiterrorism provisions in
the various laws, USAID has issued several Acquisition and Assistance
Policy Directives since 2002 that require an antiterrorism
certification in all grants and cooperative agreements and an
antiterrorism clause in all USAID awards.
* All prime awardees and subawardees of grants and cooperative
agreements are required to certify that they do not provide material
support or resources to individuals or entities engaged in terrorist
activity or to those that support them.[Footnote 19] The certification
delineates steps that awardees are supposed to take to help prevent
assistance from being provided to terrorists, such as (1) reviewing
U.S. and UN terrorist lists to ensure that awardees do not appear on
them and (2) developing reasonable monitoring procedures to safeguard
against the diversion of assistance to support terrorist activity. This
certification also provides for unilateral termination of the award by
USAID if the terms of the certification are violated.
* The antiterrorism clause applies to all prime awardees and
subwardees. It is intended to familiarize award recipients with the
names contained in Executive Order 13224 and apprise them of their
contractual responsibility to comply with executive orders and laws
that prohibit transactions with, and provision of resources and support
to, individuals and organizations associated with terrorism.[Footnote
20] USAID also mandated the inclusion of an antiterrorism clause in
awards to the UN. It states that the UN will make reasonable efforts to
ensure that no USAID funds are used to provide support to individuals
and organizations associated with terrorism.[Footnote 21]
The West Bank and Gaza mission developed additional clauses to
implement other legislated antiterrorism provisions that applied to its
awards during 2005.[Footnote 22]
* The "naming" clause, according to the mission's regional legal
advisor, is required in all prime awards initiated after December 2004.
The clause was introduced in response to allegations that USAID was
providing funding to institutions that were honoring terrorists. After
these allegations, a provision was included in the 2005 appropriations
law prohibiting the use of assistance appropriated under the Economic
Support Fund to recognize or honor individuals who commit, or have
committed, acts of terrorism.[Footnote 23]
* The "cash" clause, according to the mission's regional legal advisor,
is required in all prime awards and prohibits the provision of direct
cash assistance to the Palestinian Authority unless a presidential
certification is filed. It was first introduced in the 1998
appropriations law and has been included in annual appropriations law
since then.[Footnote 24] The regional legal advisor told us that,
although the mission originally required the cash clause as an
anticorruption measure, the clause could now serve to help prevent the
use of U.S. funds to support terrorism.[Footnote 25]
Figure 2 presents the mission's antiterrorism measures that applied to
USAID contracts, grants, and cooperative agreements during fiscal year
2005.
Figure 2: Antiterrorism Vetting, Certification, and Clause Requirements
Applicable in Fiscal Year 2005, by Financial Agreement:
[See PDF for Image]
Source: GAO analysis of USAID and West Bank and Gaza mission guidance.
[End of Figure]
West Bank and Gaza Mission's Implementation of Antiterrorism Measures
Had Limitations, but the Mission Is Taking Certain Corrective Actions:
The mission's implementation of its measures for antiterrorism vetting,
certification, and clauses in fiscal year 2005 had limitations that
reduced its ability to help ensure that U.S. assistance does not
support terrorist activities. However, the mission has taken steps, or
is taking steps, to correct many of these limitations.
Mission's Vetting Procedures Had Limitations, but It Has Taken
Corrective Actions:
The mission developed procedures for vetting awardees, but limitations
in these procedures reduced the mission's ability to help ensure that
U.S. funds do not support terrorists. However, the mission has
implemented actions to strengthen its procedures. The mission did not
collect certain biographical information, leading to less-than-
comprehensive vetting results. In addition, the mission had not
developed procedures to verify the information provided by prime
awardees or to ensure that prime awardees verified information provided
by subawardees. Further, until March 2006, a higher dollar threshold
for vetting some contractors and subcontractors reduced the numbers
vetted, and the mission eliminated a requirement for periodic revetting
of awardees in early 2006. As a result of our review and consultations
with congressional staff, the mission has made changes to strengthen
its procedures, including collecting more complete biographical data,
verifying the data provided by awardees, lowering the vetting threshold
for contracts, and reinstituting periodic revetting. Finally, several
limitations associated with the mission's vetting management database
have hampered the mission's oversight of the vetting process, although
the mission has begun taking steps to correct these issues.
West Bank and Gaza Mission Developed Vetting Procedures:
According to mission officials, the mission's vetting procedures were
the culmination of a process beginning in 2001 and based on
consultations with Congress. These procedures represent an interagency
effort forged from consultations with USAID's Asia and Near East
Bureau, USAID's antiterrorism task force, the Office of the General
Counsel, the U.S. Embassy in Tel Aviv, U.S. implementing partners, and
Palestinian nongovernmental organizations (NGOs). Since then, the
vetting procedures have been refined to account for concerns raised by
these and other parties. The mission's vetting procedures state that
the process begins when a non-U.S. prime awardee submits identifying
information about itself and its key individuals, or information about
a subawardee and its key individuals, to the mission. This information
is entered in the mission's unclassified vetting management
database[Footnote 26] and is forwarded to U.S. officials in the U.S.
Embassy in Tel Aviv who are responsible for the vetting. These
officials consult available resources, such as counterterrorism
databases, to determine whether the prime awardee, the subawardee, or
any key individuals are linked to terrorism. Memorandums containing the
vetting results are sent to the mission, which records the results in
the vetting management database.
If the prime awardee, the subawardee, or any of their key individuals
are found to have links to terrorism, the mission has the opportunity
to collect and forward additional information. If the additional data
fail to alter the initial vetting assessment results showing links to
terrorism, the mission may submit an appeal to officials at the U.S.
Embassy-Tel Aviv and the U.S. Consulate General-Jerusalem. Once a final
determination has been made, the cognizant technical officer notifies
the mission's contracting officer[Footnote 27] and the awardee of the
result and the mission's vetting management database is updated. The
proposed award or subaward is denied if the final determination shows
links to terrorist organizations or activity.
Mission Did Not Gather Comprehensive Vetting Information or Have
Procedures to Verify Information Collected from Awardees:
Until recently, the mission's vetting of individuals associated with
awardees was limited by the mission's decision not to collect certain
identifying information for key individuals associated with prime
awardees and subawardees. The mission changed this policy in June 2006.
Similarly, the vetting process was limited because the mission did not
have procedures to verify the information provided by prime and
subawardees. However, the mission has indicated it will take steps to
correct this problem.
USAID documents show that in 2001, the mission intended to collect
detailed identifying information about Palestinian prime awardees and
subawardees, including key individuals' names,[Footnote 28] places and
dates of birth, and identification numbers. However, according to USAID
officials, a number of NGOs expressed concern about providing
identifying information for key individuals because they feared that
such efforts would be seen as intelligence gathering for the United
States, Israel, or both. Consequently, the mission decided in 2002 to
routinely collect only the four-part name.
In 2002, embassy vetting officials informed USAID that (1) a person's
name alone is not sufficient proof of their identity, given how easily
names may be changed or aliases used; (2) alternative spellings of
Arabic names in English add another layer of uncertainty; and (3)
additional data elements such as date of birth would increase the
reliability of the vetting process. Since USAID provided only the four-
part name, the vetting officials required that all of their vetting
results be qualified. Our analysis showed that providing only the four-
part name led to incomplete vetting results most of the time. In a
random probability sample of 104 of 520 vetting results memorandums
received by the mission since October 2002, 94 percent of all
memorandums characterized the vetting based on only the four-part name
as less than comprehensive.[Footnote 29] The memorandums state that
additional information, such as the individual's date and place of
birth and Israeli identification number, was needed for a more complete
assessment. In addition, we found that the mission had established no
procedures to verify the accuracy of key individuals' names provided by
awardees, such as requiring an Israeli identification card, passport,
driver's license, or some other identification document.
In February 2006, USAID officials told us that when vetting with an
individual's four-part name indicated terrorist associations, the
mission would collect and provide additional information in an attempt
to verify the initial vetting results. In June 2006, as a result of
consultations with congressional staff, the mission drafted an
amendment to its policy and now requires the collection of key
individuals' dates and places of birth and Israeli identification
numbers.[Footnote 30] However, because the mission has not yet
developed procedures to verify this information, it cannot be certain
that the information in its database correctly identifies the key
individuals to be vetted. In commenting on this report, USAID stated
that the mission is following current policies and regulations, common
throughout the U.S. government, which place the burden on the
contractors and grantees to ensure the accuracy of information provided
to the government. However, the mission, prompted by our findings, is
planning to obtain an affirmative certification from awardees as to the
accuracy of key individuals' names and other data provided.
Other Procedural Limitations Have Hampered Vetting:
Until March 2006, a higher dollar threshold limited the number of
awards that were vetted, resulting in the vetting of fewer individuals
and organizations. Also, in March 2006, the mission eliminated a
requirement to periodically revet awardees, which may preclude the
revetting of some awardees after an initial clearance. Based on our
review and other factors, USAID has taken action to strengthen its
vetting procedures.
Vetting Dollar Threshold:
In fiscal years 2001 through 2003, the mission required vetting for all
non-U.S. contractors and subcontractors, as well as their key
individuals, for awards valued at $25,000 or more.[Footnote 31]
However, the mission's July 2003 action memorandum raised this
threshold to $100,000. We found that as a result of this increase, non-
U.S. organizations and individuals associated with 34 contracts
totaling approximately $2.1 million were not vetted during the period
August 2003 through February 2006. According to the mission's Regional
Legal Advisor, mission officials raised the vetting threshold in 2003
in part because they were concerned that vetting was limiting the
mission's ability to meet urgent humanitarian needs in the West Bank
and Gaza. In addition, the lower vetting threshold had not identified
any non-U.S. contractor associated with terrorism. Nevertheless,
responding to increased pressure to prevent U.S. assistance from
reaching terrorists, the mission lowered the vetting threshold back to
$25,000 in March 2006.
Periodic Revetting:
The mission's current policy regarding revetting of individuals and
organizations does not provide for the possibility that terrorist
associations may develop over the duration of an award. Prior to March
2006, mission guidance required that awardees be automatically revetted
every 3 years. However, because most prime awards and subawards do not
last 3 years, the mission dropped the revetting requirement from its
guidance in March 2006. These March 2006 vetting procedures required
that individuals and organizations be vetted once--prior to award
approval. The vetting results were considered valid for the award's
duration. The procedures also introduced additional conditions that
would cause awardees to be revetted. These conditions included changes
in key individuals, if an extension of the award is proposed, or if
information is provided to USAID that indicates that an organization or
its key individuals have been or may currently be involved in terrorist
activity.
This procedure does not take into account the fact that intelligence
regarding terrorist affiliations changes over time and that such
information may not be provided to USAID. For example, according to
mission officials, new intelligence information in 2005 showed possible
links to terrorists, including Hamas, for six organizations that
previously had been cleared. Five of these organizations had received
U.S. assistance through multiple subawards and had been vetted and
cleared by U.S. Embassy vetting officials several times. The new
intelligence information was received after three of the subawards had
been completed.[Footnote 32] One award was terminated based on the
validation of the new information and the remaining two organizations
were cleared through additional vetting.
Although the resources needed for vetting increase with the frequency
of vetting, intelligence officials stated that periodic revetting is
needed to help ensure that individuals and organizations are not
involved in terrorism. Periodic revetting would allow USAID to
proactively seek new information about awardees that had not met any of
the conditions contained in the mission's procedures that trigger
revetting. In its comments, USAID stated that, as a result of our
review, it has reinstated a periodic revetting requirement.
Limitations in the Mission's Vetting Management Database Have Hindered
Its Utility, but the Mission Is Taking Corrective Action:
A number of limitations associated with the mission's vetting
management database--unreliable data, a lack of adherence to security
policies, insufficient technical documentation, and the mission's low
prioritization of the database--have constrained the mission's
management and oversight of the vetting process. Since our review, the
mission has begun taking steps to resolve many of these
limitations.[Footnote 33]
Unreliable Data:
Our review of the database revealed several issues that call into
question the data's reliability.
* At least one of the names in the four-part name was missing from the
name fields in more than 2,595 of the database's nearly 8,800 records.
* Inappropriate data appeared in more than 1,000 records. In these
records, fields designed to display key individual titles with decision-
making and fiduciary responsibilities as defined by USAID (such as
president, executive director, or treasurer) contained the names of
Middle Eastern countries or titles such as "office boy" and
"administrative assistant."[Footnote 34]
* Data fields could be overwritten, and the system lacked an audit
trail to record changes to critical data. Thus, important historical
data, such as the date of a vetting request, could be removed
inadvertently when records were updated.
Security Issues:
In January 2006, the USAID RIG conducted a review of the mission's
vetting procedures and recommended that relevant application and
security controls be implemented. When we followed up on the RIG's
work, we found several remaining weaknesses in the security of the
vetting management database.
* Vetting reports, containing the names of key individuals identified
as having links to terrorism and the organizations they served, were
stored in an unlocked filing cabinet. As a result, the mission's
foreign service nationals and other staff without a need to know had
unrestricted access to this information.[Footnote 35]
* USAID had not obtained required approvals for a Palestinian foreign
service national to design and develop the mission's vetting management
database.[Footnote 36]
* Because the mission did not classify the database as a major
application (that is, an application that was critical to USAID's
operations), the mission did not consider the relevance of application
and security controls in maintaining its database, including the
requirements outlined in USAID Automated Directives System Section
545.[Footnote 37]
Insufficient Technical Documentation:
Although the mission backs up the database daily to allow it to restore
the database in the event of a system failure, we found that the
mission had not developed accompanying technical documentation. This
documentation would help ensure that data were consistently defined and
that the database could be rebuilt in the event of a system
failure.[Footnote 38] The minimum amount of documentation required is a
data dictionary or the equivalent information associated with a
database management system, including a description of the data
elements and their relationship.[Footnote 39]
Low Priority:
No office within the mission was formally designated as the database
owner, as required.[Footnote 40] As a result, the database was shifted
among five different offices within the mission over a 5-year period,
which may have contributed to staffs' lack of understanding of the
database capabilities and operation. For example, the individual
responsible for operating the system at the time of our review was
unaware of a database instruction manual that described how to enter
information and retrieve reports on the status of vetting submissions.
In addition, the foreign service national employee who had managed the
unclassified vetting management database since March 2005 lacked the
security clearances needed to communicate directly with vetting
officials about vetting results--adding inefficiencies to the vetting
process.
Corrective Actions:
Since our review of the West Bank and Gaza mission's vetting management
database, the mission has taken several steps to correct many of the
limitations we identified.
* In March 2006, the mission hired a U.S. direct-hire employee with a
security clearance to manage the vetting process.
* In April 2006, as a result of the Regional Inspector General's
earlier review and our observations, USAID headquarters sent
information technology specialists and the USAID counterterrorism
coordinator to review the database and related vetting procedures.
Based on that review, USAID plans to implement a more robust and secure
database by November 2006.[Footnote 41]
* The mission has moved the vetting database to the Office of Contracts
Management, where the award and vetting processes can be better
integrated.
Mission Did Not Ensure that All Antiterrorism Certifications and
Clauses Were Completed before Awards Were Approved:
Although the mission generally ensured that prime awardees of grants
and cooperative agreements certified that they have not assisted and do
not now assist terrorists, it did not ensure that applicable contracts,
grants, and cooperative agreements included the antiterrorism, naming,
and cash clauses. In addition, the mission lacked a system for
verifying, before award approval, that subawardees had signed the
required certifications and that subawards contained the required
clauses. Based on our review, the mission has implemented procedures to
verify that certifications are signed and clauses are included in
subawards. However, the mission's policies on how its antiterrorism
requirements apply to awards other than contracts, grants, and
cooperative agreements is unclear.
Most Prime Awardees Signed Certifications, but the Mission Did Not
Verify Subawardee Certifications:
The West Bank and Gaza mission generally ensured that prime awardees of
grants and cooperative agreements signed the required antiterrorism
certification;[Footnote 42] the required certifications were signed for
all of the 46 applicable prime awards that we reviewed. However,
although it has required since April 2003 that all subgrantees also
sign the certification, until recently the mission did not verify that
prime awardees collected subgrantee certifications before they gave
funds to the subgrantees. About one-fourth of the 177 certifications
for applicable subgrants that we reviewed were signed after the
subgrant start date, and 11 of the certifications were signed 6 months
to more than a year after subgrant approval. According to mission
officials, prime contractors and grantees are responsible, as part of
their due diligence in receiving and administering awards, to develop
and maintain award files, including all required or relevant preaward
certifications and representations. They are also legally obligated to
adhere to laws and regulations, emphasizing those in their subawards
that ensure the proper use and accountability of U.S. funds.
Consequently, the mission stated that it is primarily the
responsibility of the prime awardees to ensure that required
certifications are contained in subawards. However, in responding to
our observation that it lacked a system to verify compliance, in March
2006 the mission revised its policy to require that all prime awardees
submit subgrantees' certifications to the mission before award
approval.
Some Prime Awards and Subawards Did Not Contain Required Clauses:
Although the mission required for fiscal year 2005 that all prime
awards contain the antiterrorism, naming, and cash clauses and all
subawards contain the antiterrorism clause, some awards did not include
all the applicable clauses. As a result, some prime awardees and
subawardees may not have been aware of their responsibilities outlined
within these clauses. Similarly, prime awardees may not have been aware
that they were not to use U.S. funds to honor terrorists or provide
U.S. cash assistance to the Palestinian Authority.[Footnote 43]
Prime Awards:
While the West Bank and Gaza mission required that all prime awards
contain the antiterrorism, naming, and cash clauses, we found that many
did not include all three clauses. As table 1 shows, most of the awards
that we reviewed included the antiterrorism clause, including the UN
version of this clause when applicable. However, half of the awards did
not contain the naming clause and more than one in five did not contain
the cash clause.
Table 1: Percentages of USAID West Bank and Gaza Prime Awards that
Contained Required Clauses:
Clause: Antiterrorism;
Percentage with clause: 96.
Clause: Naming;
percentage with clause: 50.
Clause: Cash;
Percentage with clause: 78.
Source: GAO analysis of USAID data.
Notes: We reviewed 99 awards that were active during 2005. See
enclosure I for more information on our sampling methodology.
The 96 percent includes the UN-specific antiterrorism clause.
[End of table]
Subawards:
The mission did not verify that subawards contained the antiterrorism
clause or require them to contain the naming and cash clauses. The
mission stated that existing regulations and policies do not require
the mission to verify the inclusion of certain clauses prior to making
a subaward. Instead it is primarily the responsibility of the prime
awardee to ensure that required clauses are contained in the subawards.
However, as a result of our review, the mission now requires prime
awardees to provide the mission with copies of the pages of the
subawards containing the required clauses.
* Antiterrorism clause. Although the mission has required since 2002
that prime awardees insert the antiterrorism clause in all subawards,
the mission did not maintain lists of all current subawardees,
including the type, amount, and duration of the subawards, and did not
routinely check for the antiterrorism clause. As a result, until
revising its policy in March 2006, the mission had no way to determine
the extent to which prime awardees were complying with the requirement
to include the clause in subawards. Mission officials stated that it
was the prime awardees' responsibility to ensure that all subawards
included the required clause and that the mission used annual audits
conducted by the RIG to verify whether the prime awardees had included
the antiterrorism clause in all subawards. However, in commenting on a
draft of this report, RIG officials stated that the mission should have
its own verification system and not use RIG audits for this purpose.
Thirty-nine (about 10 percent) of the 393 applicable subawards, which
were associated with the prime awards active in 2005 that we reviewed,
did not contain the antiterrorism clause at the subaward start date. In
six of these subawards, the clause was added 2 or more years after the
start date.[Footnote 44] With the issuance of Mission Order 21 in March
2006, the mission now requires prime awardees, including the UN, to
provide copies of the subaward sections containing the antiterrorism
clauses.
* Naming clause. The naming clause was not required in subawards for
fiscal year 2005. With the issuance of Mission Order 21, the mission
now requires that all subawards include the clause.
* Cash clause. The mission did not require the cash clause in subawards
active in 2005. However, the Regional Legal Advisor stated that West
Bank and Gaza subawardees are nonetheless legally obligated to adhere
to the federal requirement on which the clause is based. In commenting
on a draft of this report, the mission stated that it has modified all
ongoing prime and subawards to include the clause and that the clause
will be required in all future subawards.
Mission Antiterrorism Polices for Some Agreements Unclear:
Although the mission has developed policies and procedures for applying
antiterrorism requirements to contracts, grants, and cooperative
agreements, it has not clearly delineated how its antiterrorism
provisions apply to certain other agreements used to transfer
assistance. These include consulting agreements, letters of
understanding, memorandums of understanding, and purchase orders (see
enc. V for definitions of these terms). We found that prime awards
active in 2005 contained subawards that were used to transfer more than
$5 million in assistance through these types of agreements.
The regional legal advisor told us that without clear policies and
procedures for these other agreements, the mission applied its
antiterrorism provisions inconsistently. For example, the regional
legal advisor stated that the mission's antiterrorism provisions
applied to consulting agreements as they would to subcontracts.
However, he also stated that the consulting agreements did not need to
include the mandatory antiterrorism clause, which the mission requires
in all subcontracts. Further, according to a mission official, USAID's
Office of Transition Initiatives required that recipients of in-kind
assistance[Footnote 45] through memorandums of understanding were
supposed to sign the antiterrorism certification. However, the mission
did not enforce this requirement until USAID's Office of the General
Counsel instructed the mission to require all in-kind assistance
recipients to sign the antiterrorism certification. In our examination
of subaward information provided by prime awardees, we found purchase
orders with the antiterrorism clause and others without. Similarly, we
found memorandums of understanding with the antiterrorism certification
and others without.
Although the mission amended Mission Order 21 to address issues
involving in-kind assistance, the order does not clearly address how
the mission's antiterrorism provisions apply to the other agreements.
In commenting on a draft of this report, mission officials stated that
there is no need to specify other types of agreements by name in its
mission order because the mission order's language is broad enough to
cover all awards that would provide assistance whether cash or in-kind.
We found that the language in the mission order broadly defined
"awards" as any contract, grant, or cooperative agreement and any cash
or in-kind assistance provided by USAID or an implementing partner in
any form. However, the language in the order describing the types of
agreements that require the antiterrorism certification and clause is
very specific. For example, the order states that the certification
requirement applies to all grants and cooperative agreements, and the
clause requirement applies to all contracts, grants, and cooperative
agreements. There is no mention of other types of agreements.
Consequently, this inconsistency between the level of specificity in
the award definitions and the descriptions of certain antiterrorism
provisions leaves their application to other types of agreements open
to interpretation.
USAID Complied with the Mandate to Audit Awardees, but the Audits Did
Not Help Ensure Compliance with Antiterrorism Provisions before Awards
Were Implemented:
To address the 2003 mandate and subsequent related mandates to complete
financial audits of prime awardees and significant subawardees in
fiscal years 2003 through 2005, USAID's RIG in Cairo, Egypt, contracted
with Palestinian audit firms and the Palestinian offices of
international audit firms.[Footnote 46] Overall, the audits focused on
compliance with financial and accounting requirements--examining the
fund accountability statement, identifying whether award costs were
allowable and reasonable, and evaluating the awardee's internal
controls. The audits also reviewed compliance with various agreement
provisions, laws, and regulations, including the applicable
requirements for vetting, certification, and clauses.[Footnote 47]
As of June 2006, the RIG issued 62 reports based on the contract
auditors' reviews for fiscal years 2003 through 2005. However, even
though the mandate was addressed, the audits' antiterrorism reviews
were of limited utility to the mission for ensuring compliance with
antiterrorism provisions prior to award implementation. This is
primarily because the audits were not initiated until after the award
had been implemented. In addition, the RIG's guidance to its contract
auditors did not always reflect the mission's antiterrorism policies
and procedures and, in 2004 and 2005, did not address certain
methodological guidance issued in October 2003.
The RIG's Antiterrorism Compliance Reviews Were Not Initiated Until
after Awards Were Implemented:
The timing of the RIG's financial audits and certain other issues
limited their usefulness to the mission for determining whether
awardees had complied with the antiterrorism requirements. Because the
primary focus of the RIG's audits was financial, the audits were not
initiated until after the award had been implemented or, in some cases,
completed. This means that any shortcomings or omissions in conducting
the required vetting or ensuring that the antiterrorism certifications
and clauses were in the awards or subawards, as required, would not
have been found by the auditors until after the award or subaward had
been made. As a result, the mission would not have learned of any
instances of noncompliance identified by the RIG's auditors until after
the award start date or, in some cases, until after the award's
conclusion.
In addition, as directed by the mandate, the RIG's audits focused on
contractors and grantees (and significant subawardees) implementing
U.S. assistance programs in the West Bank and Gaza. However, some prime
awardees in fiscal years 2002 through 2005 administered several awards.
As a result, once an award to a particular contractor, grantee, or
significant subawardee had been audited, other awards to the same
awardee would not necessarily have been examined, and compliance with
antiterrorism provisions for those awards or significant subawards
would not have been reviewed.
Moreover, about one-third of the RIG's audit reports issued in fiscal
years 2004 through 2006 did not clearly state which antiterrorist
provisions were examined, if any, or did not report the audit results.
Of the 62 reports, 14 reports (23 percent) did not state which mission
requirements for vetting, certification, and clauses were applicable,
if any, or whether compliance with them was reviewed. An additional
seven reports (11 percent) stated that compliance with the mission's
antiterrorism provisions was reviewed but did not provide any statement
of the results.
In commenting on a draft of this report, the mission stated that it
used annual audits managed by the RIG to verify whether the prime
awardees were in compliance with antiterrorism certification and clause
requirements. It also stated that the audits served to strengthen and
improve compliance with antiterrorism requirements. However, the
Inspector General's Office stated in its response to a draft of this
report that since the mission is responsible for ensuring compliance
with antiterrorism provisions, the mission should develop a system
other than relying solely on financial audits, which are conducted
after awards are made to ensure that funds provided to awardees are
being spent as intended.
Auditors' Guidance Did Not Always Reflect Mission Policy and Was Not
Clear on Audit Methodology for Subawards:
In some instances, the written guidance provided to the RIG's contract
auditors did not reflect the mission's policies and procedures for
vetting, certifications, and clauses.
* Vetting. Although the mission implemented its vetting policies and
procedures in October 2002, the written guidance to auditors in
September and October 2003 did not explicitly require that they confirm
that vetting was done. However, the statements of work provided to
auditors in 2004 and 2005 included specific language directing auditors
to determine compliance with vetting procedures.
* Certifications. The October 2003 written guidance regarding
antiterrorism certifications differed from the mission's policy at the
time. The mission required signed certifications for all awards and
subawards, but the RIG guidance did not direct the auditors to verify
that certifications were signed for subgrants under grants.[Footnote
48]
* Clauses. The RIG's written guidance directed the auditors to check
for a less detailed version of the antiterrorism clause than mission
guidance called for. The clause provided to the auditors, unlike the
mission's version, did not state that (1) it was required in subawards,
(2) awardees must promptly notify USAID of significant changes in key
individuals, or (3) USAID reserves the right to approve or reject
certain subawardees.
In addition, the RIG's October 2003 supplementary guidance to its
auditors prohibited selecting a random sample of subawards to review
for compliance with the antiterrorism certifications and clauses.
However, the statements of work for fiscal years 2004 and 2005 did not
specify whether auditors should select a sample of subawards or examine
all subawards. Two contract audit firms were hired after the 2003
guidance was issued. We found that these firms had not received the
guidance; consequently, unless the auditors were otherwise aware of the
October 2003 guidance, some auditors may not have reviewed all
subawards.
Conclusion:
The January 2006 election victory of Hamas in the Palestinian
Legislative Council has led to increased concern that U.S. assistance
to the West Bank and Gaza not support terrorists, as required by U.S.
antiterrorism provisions. Although the USAID West Bank and Gaza mission
developed policies and procedures for antiterrorism vetting,
certifications, and clauses, its implementation of the provisions
limited the mission's ability to ensure that U.S. assistance was not
provided to terrorists or was used to support terrorism. Since our
review, the mission has taken steps to correct many of these
limitations, but others remain to be addressed.
* Although the mission has begun to collect more complete identifying
information for vetting key individuals, its lack of a procedure to
verify this information means that it cannot be certain that the
information is accurate.
* Unresolved problems with the mission's vetting management database
continue to affect its reliability, maintenance, and security, and the
mission's recent elimination of a requirement that awardees be
periodically revetted makes it less likely the mission will detect an
awardees' terrorist associations that develop after initial vetting.
* Because the mission still does not require that prime awardees
include the cash clause in all subawards, some subawardees may not be
aware of their contractual responsibility not to support the
Palestinian Authority.
* The mission's lack of formal policies and procedures for applying its
antiterrorism provisions to financial agreements other than contracts,
grants, and cooperative agreements may have resulted in some U.S.
assistance going to the West Bank and Gaza without applying the
antiterrorism provisions.
Despite the difficulty of the task, the mission should do more to
ensure that U.S. assistance is not provided to terrorists or those who
support terrorism.
To comply with the 2003 mandate to conduct financial audits of mission
awardees, USAID's RIG contracted for audits and included the
requirement to review compliance with antiterrorism provisions.
However, financial audits are typically initiated after an award has
been implemented or, in some cases, completed. As a result, the audits
were of limited utility to the West Bank and Gaza mission for helping
ensure compliance with the vetting, certification, and clause
requirements, which, according to mission guidance, should be met
before the award is made. In addition, the guidance for the RIG's
contract auditors did not always reflect the mission's policies and
procedures for vetting, certifications, and clauses at the time of the
award; and the RIG's October 2003 methodological guidance for examining
subawards was not incorporated into its written guidance for 2004 and
2005. To enhance the mission's ability to promptly identify and address
any lack of compliance with U.S. antiterrorism provisions, the mission
needs to develop a system to review and report on compliance with its
antiterrorism requirements before the awards are made and to ensure
that the guidance provided for such reviews reflects the mission's
policies and procedures at the time and adequately documents
methodological approaches.
Recommendations for Executive Action:
To help ensure that U.S. assistance to West Bank and Gaza does not
support terrorist activity, we recommend that the Director of U.S.
Foreign Assistance and USAID Administrator direct the mission to take
the following four actions:
* 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;
* ensure that the mission's vetting management database promotes data
reliability, satisfies technical documentation requirements, and meets
all applicable security requirements;
* ensure that the cash clause is included in all subawards before they
are initiated; and:
* develop policies and procedures that address how each antiterrorism
provision applies to consulting agreements, letters of understanding,
memorandums of understanding, and purchase orders.
We also recommend that the Director of U.S. Foreign Assistance and
USAID Administrator and the West Bank and Gaza mission, 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 Comments and Our Evaluation:
USAID and USAID's Office of Inspector General provided written comments
on a draft of this report. See enclosures II and III, respectively.
State did not provide written comments. In addition, USAID, the USAID
Regional Inspector General-Cairo, and State provided us with technical
comments and updates, which we have incorporated throughout this
report, as appropriate. In its written comments, USAID also suggested
several points of clarification, which we have also incorporated.
Overall, USAID noted that our fieldwork and draft report made a
positive contribution to improving and strengthening the mission's
antiterrorism procedures. As we note throughout the report, the mission
acted on or began acting on many of our findings while the engagement
was ongoing. USAID accepted our recommendations to modify its vetting
procedures, improve its vetting management database, and ensure that
the cash clause is included in all subawards. It noted the mission has
begun or completed action to address these issues.
However, USAID disagreed with our recommendation that it should develop
policies and procedures for applying antiterrorism provisions to other
assistance agreements, such as memorandums of understanding and
purchase orders. It noted that these "unusual instruments" either do
not provide assistance or are already covered by the mission's current
guidance. We note that since our review the mission has amended Mission
Order 21 to apply antiterrorism provisions to in-kind assistance. We
also note that, while the order is very specific regarding contracts,
grants, and cooperative agreements (and now in-kind assistance), it
does not specifically address other types of agreements. We believe the
mission still needs to clarify how antiterrorism provisions apply to
all types of agreements the mission uses.
Finally, the USAID Inspector General said his office would be pleased
to cooperate with the mission to develop a system to help ensure that
the antiterrorism provisions are met before financial agreements are
implemented. The Inspector General did not specifically address our
recommendation that it ensure that its audit guidance reflects
applicable mission policies and that its methodology for examining
subawards is clear and consistent. USAID agreed about the necessity of
an improved system for ensuring compliance with antiterrorist
provisions before prime awards and subawards are implemented. However,
it noted that this responsibility rests with the mission and the prime
awardees, and should not be the subject of "preaward audits." USAID
also noted that its contractors and grantees are long-standing
implementing partners who are cognizant of their obligations to adhere
to federal and USAID policies and guidance. Moreover, as of March 2006,
the mission began systematically verifying that subawardees signed the
required certifications and that subawards had the mandatory clauses.
We purposely did not specify how the mission should ensure that its
antiterrorism provisions are in place before awards are implemented. We
recommended that USAID and the West Bank and Gaza mission cooperate
with the USAID Regional Inspector General-Cairo to develop such a
system because the mission had relied on its audits in the past.
Copies of this report are being sent to the Secretary of State, the
Director of Foreign Assistance and USAID Administrator, the USAID
Inspector General, relevant congressional committees, and other
interested parties. We will also make copies available to others upon
request. In addition, the report will be made available at no charge on
GAO's Web site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me on (202) 512-3149 or at GootnickD@gao.gov. Contact points
for our Office of Congressional Relations and Office of Public Affairs
may be found on the last page of this report. Major contributors to
this report are listed in enclosure IV.
Signed by:
David Gootnick, Director:
International Affairs and Trade:
Enclosures:
Enclosure I:
Scope and Methodology:
To determine the extent to which the United States Agency for
International Development's (USAID) West Bank and Gaza mission (the
mission) complied with Executive Order 13224 and the various
antiterrorist restrictions in the Consolidated Appropriations Acts of
2003, 2004, and 2005, we examined the mission's implementation of
several USAID Acquisition and Assistance Policy Directives issued since
2002. Because we were mandated to examine USAID's use of fiscal year
2005 funding for the West Bank and Gaza, we focused our review on the
mission's contracts, grants, and cooperative agreements (and related
subawards) that were active during fiscal year 2005 and had received
fiscal year 2005 funds through March 2006. In February 2006, we
traveled to Tel Aviv, Israel, and discussed the mission's
implementation of the antiterrorism requirements with the USAID Mission
Director, his senior staff, project officers, contract technical
officers, and other USAID mission officials responsible for managing
assistance projects and overseeing contracts, grants, and cooperative
agreements. We reviewed the mission's antiterrorism guidance and
examined in detail (1) the mission's vetting documentation and vetting
management database to determine if the mission had documented that it
had vetted awardees and subawardees, as required; and (2) the various
financial agreements' records to determine if antiterrorism
certifications had been signed and the required clauses were in the
awards and subawards, as required.
* To understand the mission's vetting process, we discussed with
various mission officials, including the Regional Legal Advisor, how
the process worked. We examined the documentation provided to the
mission in response to its vetting for organizations and individuals.
To gain a better understanding of the vetting responses, we randomly
selected a probability sample[Footnote 49] of 520 vetting results
memorandums accumulated by the mission beginning in 2002 through March
2006. We also discussed the operation of the mission's vetting
management database with the foreign service national charged with
maintaining it at the time of our review. He provided us access to the
vetting database and its related documentation. In addition, during our
review, we obtained related information from the Defense Intelligence
Agency, the Central Intelligence Agency, and the Departments of State
and Treasury.
* To determine whether the mission's prime awards contained the
antiterrorism certification and clauses, as required, we reviewed the
mission's files for all 99 prime awards that were active during 2005.
Of the 99 prime awards, 20 were cooperative agreements and 3 were
grants. To determine whether the subawards contained the required
antiterrorism certifications and clauses, we reviewed all 99 prime
awards to determine which had subawards. We found 67 prime awards with
a total of 931 subawards. We then examined the subawards as follows:
- For antiterrorism certifications, the requirement applied to any
subgrants issued under a contract, grant, or cooperative agreement
after April 1, 2003. We found that 14 prime awards (6 contracts, 2
grants, and 6 cooperative agreements) had subgrants that required an
antiterrorism certification. For 13 of these prime awards, we examined
all the applicable subgrants, for a total of 104. However, 4 of these
were not dated, and thus, could not be assessed. The remaining prime
award had 190 applicable subgrants. We selected a random sample of 73
of these. Therefore, we examined a total of 177 (about 60 percent) out
of 294 applicable subgrants under 14 prime awards.
- For the antiterrorism clauses, the requirement applied to any
subawards under prime awards that were issued on or after March 20,
2002. In some cases, prime awards entered into prior to March 20, 2002,
were modified to include the clause, and those related subawards also
required the clause as of the date of the modification. Of a total of
488 subawards that fit this category, 24 were missing documentation and
therefore could not be analyzed. Seventy-one of these subawards were
affiliated with UN agencies and therefore did not require the clause to
be included in subawards. Therefore, we found that a total of 393
subawards were required to contain the clause and we examined all of
them.
For our analysis of the mission's financial agreements, we developed a
data collection instrument to help ensure that our reviews of the
mission's files were consistent. To help us track and analyze the
information collected, we developed a database to record the data for
each award. For each prime award, we recorded information regarding
vetting, certification, and clauses, as well as more than 30 other data
elements, including the award number, project name, start and end
dates, and objectives and goals. For each subaward, we recorded key
information about the certifications and antiterrorism clause, as well
as the subaward type, signature date, dollar value, subawardee name,
U.S. or non-U.S. designation, and key individuals' names. During our
review of the mission's financial agreement files, we discussed any
conflicting data or, in some cases, missing data, with the cognizant
project officer or contract technical officer. In this way, we resolved
any apparent disparities and satisfied ourselves that the data we
compiled were sufficiently reliable for the purposes of this report.
In reviewing the RIG's financial audits that addressed, in part, the
West Bank and Gaza mission's compliance with its antiterrorism
provisions, we examined 62 audit reports on assistance to the West Bank
and Gaza issued in fiscal years 2004 through 2006. These reports
covered awards active from 2002 through 2005. In addition, we traveled
to Cairo, Egypt, and met with RIG officials to discuss its audit
coverage of USAID West Bank and Gaza awards. When we were not clear
about the audit reports' scope and methodology, we followed up with the
cognizant Regional Inspector General (RIG) official. In this way, we
resolved any apparent disparities and satisfied ourselves that the data
we compiled were sufficiently reliable for the purposes of this report.
Enclosure II: USAID Comments:
USAID: From The American People:
September 22, 2006:
Mr. David Gootnick:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Gootnick:
I am pleased to provide the U.S. Agency for International Development's
(USAID) formal response on the draft GAO 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). USAID thanks the GAO and its staff for their hard
work and professionalism.
The GAO team's field work and draft report contributed positively to
the continuous improvement and strengthening of our anti-terrorism
vetting procedures. In fact, implementation of some GAO recommendations
began while the audit was still on-going. We are particularly pleased
to note that this comprehensive review identified no funding going to
terrorist individuals or organizations, a clear indication that the
systems the USAID Mission has in place are an effective bulwark
ensuring that U.S. assistance does not support terrorism. We have
enclosed background information highlighting points we feel warrant
further clarification, and information on the recommendations GAO has
made as a result of its audit.
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this
review.
Sincerely,
Signed by:
Lisa D. Fiely:
Chief Financial Officer:
Enclosure: a/s:
Response to GAO Report 06-1062R 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 (August 2006):
Background:
We believe two important points do not get adequate attention in the
draft report:
1. USAID West Bank and Gaza was at the vanguard of U.S. Government
agencies establishing anti-terrorism vetting procedures for assistance.
Current procedures are the culmination of a long evolutionary process
beginning in July 2001 that included broad consultations with Congress
and other Executive Branch agencies, within USAID, and now with the
GAO. A diagram of the Mission's vetting process has been provided to
the GAO.
2. It is important to view the anti-terrorism procedures in light of
the overall program and its strategic importance to the success of the
USG policy in support of a two state solution to the
Israeli/Palestinian issue. While those procedures have importance in
and of themselves, they must be developed, implemented, and assessed
not only in terms of applicable regulations and laws, but also in terms
of how they relate to the achievement of foreign policy objectives.
Recommendations for Executive Action:
The first four recommendations are directed specifically to the West
Bank and Gaza Mission. The fifth recommendation includes the
cooperation of the Regional Inspector General (RIG)/Cairo.
The report's first recommendation is to consider (1) verifying the
identifying data collected for vetting; and (2) reinstating periodic
revetting of awardees. USAID accepts this recommendation and plans to
require implementing partners to provide an affirmative certification
as to the accuracy of the information, as they are best situated to be
able to verify the information.
The second recommendation is to ensure the vetting management database
meets data reliability, technical documentation and security
requirements. USAID accepts the recommendation. The Agency has devoted
considerable resources toward developing a more sophisticated database
that will be hosted in USAID/Washington and will be fully compliant.
The third recommendation is to ensure that the cash clause is included
in all subawards. USAID accepts the recommendation and since March 2006
has required prime awardees to provide a copy of the cash clause that
appears in each sub-award. We have requested that the relevant report
language be changed to reflect this.
The fourth recommendation is to develop policies and procedures on how
anti-terrorism provisions apply to unusual instruments, such as
memoranda of understanding, project agreements, and purchase orders. We
disagree with the premise of the recommendation, as the instruments
referred to are either instruments which do not provide assistance or
forms of contracts which are already covered by the Mission's current
procedures.
The fifth recommendation is to work with USAID's Inspector General in
Cairo (RIG) to institute "pre-award audits" to ensure that all
applicable clauses are included in all awards and subawards. While
USAID agrees with the GAO that there needs to be an improved system for
ensuring compliance with pre-award anti-terrorism requirements
(vetting, certification, and contract/grant clauses), USAID also agrees
with the RIG that this responsibility rests with the USAID mission and
the prime awardees, and should not be the subject of "pre-award
audits." This view conforms to standard federal government regulations
that put responsibility on prime awardees for ensuring that all
subawards are in compliance with federal government requirements.
Further, the vast majority of the Mission's contractors and grantees
are long-standing USAID partners who are cognizant of their obligation
to adhere to federal and USAID policies and guidance, are aware of
their and their sub-awardees' legal responsibilities not to provide
assistance and support to entities affiliated with terrorism; and have
thorough, long established internal procedures to ensure compliance.
Morever, following the issuance of Mission order No. 21 in March 2006,
the Mission began systematically verifying that recipients of sub-
awardees signed the required certifications and that subawards
contained the mandatory clauses, thus meeting the intent of the GAO
recommendation.
The second recommendation is to ensure the vetting management database
meets data reliability, technical documentation and security
requirements. USAID accepts the recommendation. The Agency has devoted
considerable resources toward developing a more sophisticated database
that will be hosted in USAID/Washington and will be fully compliant.
The third recommendation is to ensure that the cash clause is included
in all subawards. USAID accepts the recommendation and since March 2006
has required prime awardees to provide a copy of the cash clause that
appears in each sub-award. We have requested that the relevant report
language be changed to reflect this.
The fourth recommendation is to develop policies and procedures on how
anti-terrorism provisions apply to unusual instruments, such as
memoranda of understanding, project agreements, and purchase orders. We
disagree with the premise of the recommendation, as the instruments
referred to are either instruments which do not provide assistance or
forms of contracts which are already covered by the Mission's current
procedures.
The fifth recommendation is to work with USAID's Inspector General in
Cairo (RIG) to institute "pre-award audits" to ensure that all
applicable clauses are included in all awards and subawards. While
USAID agrees with the GAO that there needs to be an improved system for
ensuring compliance with pre-award anti-terrorism requirements
(vetting, certification, and contract/grant clauses), USAID also agrees
with the RIG that this responsibility rests with the USAID mission and
the prime awardees, and should not be the subject of "pre-award
audits." This view conforms to standard federal government regulations
that put responsibility on prime awardees for ensuring that all
subawards are in compliance with federal government requirements.
Further, the vast majority of the Mission's contractors and grantees
are long-standing USAID partners who are cognizant of their obligation
to adhere to federal and USAID policies and guidance, are aware of
their and their sub-awardees' legal responsibilities not to provide
assistance and support to entities affiliated with terrorism; and have
thorough, long established internal procedures to ensure compliance.
Morever, following the issuance of Mission order No. 21 in March 2006,
the Mission began systematically verifying that recipients of sub-
awardees signed the required certifications and that subawards
contained the mandatory clauses, thus meeting the intent of the GAO
recommendation.
Statements Requiring Clarification:
The draft report includes several statements that warrant
clarification, including the following:
1. "Although the mission has begun to collect more complete identifying
information for vetting key individuals, its lack of a procedure to
verify this information means that it cannot be certain that the
information is accurate." This statement implies that the information
the Mission collects may be inaccurate. There is no indication or
evidence to suggest that information provided is inaccurate, only that
further steps could be taken to provide additional comfort as to its
accuracy. This is an important clarification given that the draft
report and past reviews have established no indication of false or
inaccurate data or that the Mission's implementing partners have not
verified information collected.
2. "Unresolved problems with the mission's vetting management database
continue to affect its reliability, maintenance, and security, and the
mission's recent elimination of a requirement that awardees be
periodically revetted makes it less likely the mission will detect an
awardees' terrorist associations that develop after initial vetting."
As the draft report mentions, the Mission is replacing its database as
a way to strengthen its anti-terrorism procedures. The new database,
expected to be operational in November 2006, will address all findings
and recommendations from the RIG's review of the current database and
will implement relevant application and security controls such as those
in Automated Directives System 545, Information Systems Security.
As for the periodic revetting, the Mission believes that the additional
revetting "triggers" outlined in Mission Order #21 (which added more
stringent rules) better anticipate the possibility that terrorist
associations may develop over time than periodic revetting. A
description of this process in the draft report would provide the
reader with some context for the Mission's decision.
USAID once again thanks the GAO for its diligence and rigor in
preparation of the draft report and for the opportunity to comment.
Appendix 1:
[See PDF for Image]
The following are GAO's comments on USAID's letter dated September 22,
2006.
1. The diagram provided by USAID has been included with the agency's
comments.
2. Information pertaining to the overall purpose of USAID's assistance
is included in the background section of the report.
3. USAID disagrees with our recommendation that it should develop
antiterrorism policies and procedures for "unusual" instruments such as
memorandums of understanding and purchase orders. USAID stated that it
believes that its current policies and procedures are broad enough to
cover all types of assistance agreements. We believe that clarifying
the definitions of awards and subawards contained in mission order 21
and how antiterrorism provisions apply to other types of awards could
help ensure that antiterrorism policies are correctly and consistently
applied. We added additional evidence and information to the report to
further demonstrate the need to clarify the policies and procedures.
4. We agree that the responsibility for ensuring that the antiterrorism
policies and procedures are correctly and consistently applied rests
with the mission and prime awardees. We purposely did not specify how
the mission should ensure that its antiterrorism provisions are in
place before awards are implemented. We recommended that USAID and the
West Bank and Gaza mission cooperate with the USAID Regional Inspector
General-Cairo to develop such a system because the mission had relied
on its audits in the past. We also noted in the report that USAID now
requires that awardees provide copies of required certification and
award sections containing the antiterrorism-related clauses prior to
award approval.
5. In technical comments USAID provided on a draft of this report,
USAID stated that it is planning to obtain an additional certification
from awardees as to the accuracy of key individuals' names and other
data provided. We added information to the report to reflect this new
procedure.
6. We describe the corrective actions that USAID is taking to improve
its vetting management database where applicable in the report.
7. Additional information has been added to the report that describes
the additional conditions that would require that revetting occur.
USAID also stated in its technical comments that it plans on
reinstating a periodic revetting requirement. This change in policy has
been added to the report.
Enclosure III: USAID Inspector General Comments:
USAID: From The American People:
Office of Inspector General:
September 5, 2006:
David Gootnick:
Director, International Affairs and Trade:
United States Government Accountability Office:
Washington, DC 20548:
Dear Mr. Gootnick:
Thank you for the opportunity to comment on the draft report titled
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).
Our Regional Office of Inspector General in Cairo will continue to work
closely with the USAID Mission in providing assistance and to ensure
that non-Federal auditors perform their work in accordance with
Government Auditing Standards in addressing the audit needs of USAID/
West Bank and Gaza. We would be pleased to cooperate with USAID/West
Bank and Gaza as it implements GAO's recommendation on page 30 of the
draft report to "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 financial agreements are implemented."
Since the Mission is responsible for ensuring that these requirements
are met, we agree that it should develop a system other than relying
solely on financial audits-which by their nature are conducted after
awards are made so as to ensure that funds provided to awardees are
being spent as intended. These audits will also continue to include
steps to review whether the Mission carried out required antiterrorism
provisions.
Therefore, we believe the captions stating that these audits were of
"Limited Utility to the Mission" should be revised since the audits are
doing precisely what they were designed to do. We suggest that the
captions on pages 25 and 26 be revised as follows. The caption on page
25 should read "USAID Complied with the Mandate to Audit Awardees, but
Other Procedures Are Necessary to Ensure Compliance with Antiterrorism
Provisions." The caption on page 26 should read: "The Antiterrorism
Compliance Review Needs to Be Accomplished Before Financial Audits Are
Performed." Accordingly, the text following these captions should be
revised to remove statements that these audits were not useful and to
clearly state that systems and procedures, other than financial audits,
need to be put in place before awards are made.
Our Regional Office of Inspector General in Cairo will cooperate and
consult with USAID/West Bank and Gaza as they implement these systems
and procedures. In doing so, our office needs to ensure that we will
not be involved with clearing or approving such systems in order to
maintain our independence as USAID's Office of Inspector General.
Sincerely,
Signed by:
Joseph Farinella:
Assistant Inspector General for Audit:
U.S. Agency for International Development:
1300 Pennsylvania Avenue, NW:
Washington, DC 20523:
www.usaid.gov:
Enclosure IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
David Gootnick (202) 512-3149:
Staff Acknowledgments:
Albert H. Huntington, III; David M. Bruno; Jeffrey L. Hartnett; Arthur
James; and Robert E. Lee made key contributions to this report. In
addition, Claude T. Adrien, Martin de Alteriis, Etana Finkler, Reid L.
Lowe, Grace P. Lui, and Jose M. Pena provided technical assistance.
Enclosure V:
Glossary:
USAID has used the following types of financial agreements to transfer
assistance in the West Bank and Gaza.[Footnote 50]
Consulting agreements are used to retain, in an advisory role, an
individual considered an expert in his or her field. The contractual
form may be an employment agreement or subcontract, depending on the
organization's practices.
Contracts are principally used to acquire property or services for the
use of the federal government.
Cooperative agreements are used to transfer money, property, or
services to provide federally authorized support or stimulation in
which USAID is expected to be substantially involved.
Grants are principally used to transfer money, property, or services to
provide federally authorized support or stimulation in which USAID is
not expected to be substantially involved.
Letters of agreement are used to record a common understanding where
USAID's standard provisions would not otherwise be required to be
incorporated to apply specific conditions on the interaction.
Memorandums of understanding (MOUs) set forth an agreement between
parties. An MOU may be used to cover a range of topics, including
results to be achieved, activities to be implemented, and the
respective roles and responsibilities of each party. An MOU is not used
for obligating funds. However, an MOU may be used to confirm an
agreement with a host government on a program that USAID will fund
directly through an obligating agreement signed with other parties.
Purchase orders set forth USAID's contractual agreement for small
purchases of goods and services.
(320379):
These definitions are from the USAID Automated Directives System
Glossary and West Bank and Gaza mission staff.
FOOTNOTES
[1] Executive Order 13224, 66 Fed. Reg. 49070 (Sept. 23, 2001) pursuant
to the authorities of the International Emergency Economic Powers Act
(50 U.S.C. 1701 et seq.); the National Emergencies Act (50 U.S.C. 1601
et seq.); sec. 5 of the United Nations Participation Act of 1945, as
amended (22 U.S.C. 287c) (UNPA); and sec. 301 of title 3, United States
Code.
[2] Consolidated Appropriations Resolution of 2003, Pub. L. No. 108-7,
§ 568(b), 117 Stat. 11, 207 (2003); Consolidated Appropriations Act of
2004, Pub. L. No. 108-199, § 566(b), 118 Stat. 3, 195 (2004); and
Consolidated Appropriations Act of 2005, Pub. L. No. 108-447, §559(b),
118 Stat. 2809, 3019 (2004).
[3] For the purposes of this report, we define active awards as awards
for which obligations or expenditures were made in fiscal year 2005.
According to West Bank and Gaza mission documents, vetting involves
checking the names of individuals and organizations that implement
USAID projects against databases and other information sources to
determine if they are involved with terrorism. Throughout this report,
we use the term "prime awardees" to refer to organizations that receive
USAID contracts, grants, or cooperative agreements to implement U.S.
assistance projects. "Subawardees" refer to organizations that receive
subcontracts or subgrants from prime awardees for work on U.S.
assistance projects. In addition to using contracts, grants, and
cooperative agreements, USAID provides assistance through consulting
agreements, letters of understanding, memorandums of understanding, and
purchase orders. See enclosure I for definitions of these terms.
[4] Emergency Supplemental Appropriations for Defense, the Global War
on Terror, and Tsunami Relief, 2005, Pub. L. No. 109-13, § 2103, 119
Stat. 231, 266 (2005). Other issues related to assistance delivered by
USAID's West Bank and Gaza mission--including information on
obligations, expenditures, and the impact of the assistance--will be
covered in a future report.
[5] Since 2003, U.S. appropriations acts (§ 568(b), 117 Stat. at 207; §
566(b), 118 Stat. at 195; § 559(b) 118 Stat. at 3019) have required
that federal or nonfederal audits of all USAID contractors, grantees,
and significant subcontractors and subgrantees in the West Bank and
Gaza be conducted at least annually to ensure, among other things,
compliance with U.S. antiterrorism provisions related to assistance for
West Bank and Gaza. The USAID RIG determined the significance of
subawardees based on the total value of the awards provided to the
subawardee.
[6] The mission defines key individuals as those who have financial and
management decision-making authority over the operations of the
organization. USAID specifies that such individuals include the program
manager or chief of party for the USAID-financed program; the principal
officer and deputy principal officer of the organization (for example,
executive director, deputy director, president, or vice-president); the
principal officers of the organization's governing body (for example,
chairman, vice-chairman, treasurer, and secretary of the board of
directors or board of trustees); and any other person with significant
responsibilities for administration of USAID-financed activities or
resources.
[7] Up to $1 million was provided to the USAID Office of the Inspector
General in each fiscal year to conduct the audits.
[8] The West Bank has a land area of 2,263 square miles and a
population of about 2.4 million. Gaza has a land area of 139 square
miles and a population of about 1.4 million.
[9] The accords called for the withdrawal of Israeli forces from Gaza
and parts of the West Bank and affirmed the Palestinian right to self-
government within those areas through the creation of the Palestinian
Interim Self-government Authority. Palestinian rule would last for a 5-
year interim period during which a permanent agreement would be
negotiated (beginning not later than the third year of the interim
period).
[10] The quartet is involved in mediating the peace process between the
State of Israel and the Palestinian Authority.
[11] These funds include $121 million in direct budget support for the
Palestinian Authority and $1.3 billion to the UN Relief and Works
Agency.
[12] The Economic Support Fund promotes the economic and political
foreign policy interests of the United States by providing assistance
to allies and countries in transition to democracy, supporting Middle
East peace negotiations, and financing economic stabilization programs.
Recent appropriations acts prohibit the provision of Economic Support
Fund assistance in the West Bank and Gaza to support or recognize
individuals or organizations involved in terrorism.
[13] See Emergency Supplemental Appropriations Act for Defense, the
Global War on Terror, and Hurricane Recovery, 2006 Pub. L. No. 109-234,
§ 1304, 120 Stat. 418, 435 (2006). The act was signed into law on June
15, 2006.
[14] The assistance includes $50 million for Israel's use in easing the
movement and access of Palestinian people and goods, while improving
its security.
[15]
[16] Earlier executive orders concerning antiterrorism and the Middle
East peace process include Executive Order 12947, 60 Fed. Reg. 5079
(Jan. 23, 1995), and Executive Order 13099, 63 Fed. Reg. 45167 (Aug.
20, 1998). Orders issued subsequent to Executive Order 13224 that amend
it include Executive Order 13268, 67 Fed. Reg. 44751 (July 2, 2002),
which, among other actions, added two individuals to the list of
designated terrorists contained in Executive Order 13224, and Executive
Order 13284, 68 Fed. Reg. 4075 (Jan. 23, 2003), which stipulates that
the Department of Homeland Security be included in consultations about
whether to designate an individual or organization as a terrorist and
what actions should be taken to carry out Executive Order 13224.
[17] § 568(b), 117 Stat. at 207; § 566(b), 118 Stat. at 195; § 559(b)
118 Stat. at 3019. Similar language was included in the Foreign
Operations, Export Financing, and Related Programs Appropriations Act,
2006, Pub. L. 109-102, § 559(b), 119 Stat. 2172, 2221 (2005). Section
1304 of the Emergency Supplemental Appropriations Act for Defense, the
Global War on Terror, and Hurricane Recovery, 2006, requires the
Secretary of State to report to the Committees on Appropriations that
appropriate procedures and safeguards exist to ensure that U.S.
assistance is not provided to or through any individual, private or
government entity, or educational institution that the Secretary knows
or has reason to believe advocates, plans, sponsors, engages in, or has
engaged in, terrorist activity.
[18] Consolidated Appropriations Act of 2005, Pub. L. No. 109-102, §
559(c), 118 Stat. 2809, 3019 (2004).
[19] § 568(c), 117 Stat. at 207; § 566(c), 118 Stat. at 195; § 559(d)
118 Stat. at 3019.
[20] This requirement can be found in USAID Acquisition and Assistance
Policy Directives 02-19 (December 2002), 04-07 (March 2004), 04-14
(September 2004) and action memorandums.
[21] The antiterrorism clause requirements are specified in Acquisition
and Assistance Policy Directive 02-04 (March 2002) and in action
memorandums.
[22] The UN version of the antiterrorism clause is specified in
Acquisition and Assistance Policy Directive 03-04 (May 2003).
[23] On October 30, 2002, and July 3, 2003, the USAID West Bank and
Gaza mission Regional Legal Advisor issued two action memorandums that
were distributed to the mission summarizing the antiterrorism
requirements in place at the time.
[24] § 559(c), 118 Stat. at 3019.
[25] Foreign Operations, Export Financing, and Related Programs
Appropriations Act of 1998, Pub. L. No. 105-118, § 566, 111 Stat. 2386,
2428 (1997); Omnibus Consolidated and Emergency Supplemental
Appropriations Act of 1999, Pub. L. No. 105-277, § 566, 112 Stat. 2681,
2681-194 (1998); Consolidated Appropriations Act of 2000, app. B, Pub.
L. No. 106-113, § 563, 113 Stat. 1501, 1501A-105, (1999); Foreign
Operations, Export Financing, and Related Programs Appropriations Act
of 2001, app. A, Pub. L. No. 106-429, § 562, 114 Stat. 1900, 1900A-46
(2000); Foreign Operations, Export Financing, and Related Programs
Appropriations Act of 2002, Pub. L. No. 107-115, § 555, 115 Stat. 2118,
2160 (2002); Consolidated Appropriations Resolution of 2003, Pub. L.
No. 108-7, § 552, 117 Stat. 11, 2000 (2003); Consolidated
Appropriations Act of 2004, Pub. L. No. 108-199, § 552, 118 Stat. 3,
188 (2004); Consolidated Appropriations Act of 2005, Pub. L. No. 108-
447, § 550, 118 Stat. 2809, 3014; and Foreign Operations, Export
Financing, and Related Programs Appropriations Act of 2006, Pub. L. No.
109-102, § 550, 119 Stat. 2172, 2217 (2005).
[26] We analyzed the application of the cash clause in all USAID awards
active in 2005 because of Hamas' election victory and subsequent
control of the Palestinian Authority.
[27] The mission database is intended to store information collected on
organizations and individuals that require vetting, track the dates
when vetting occurred, and record the vetting results.
[28] A cognizant technical officer performs functions that are
designated by the contracting or agreement officer or is specifically
designated by policy or regulation as part of contract or assistance
administration. A contracting officer represents the U.S. government
through the exercise of his or her delegated authority to enter into,
administer, and terminate contracts and make related determinations and
findings.
[29] The four-part name comprises the individual's given name, the
father's given name, the grandfather's given name, and the individual's
surname.
[30] Our sample survey finding that vetting in 94 percent of the 520
memorandums was less than comprehensive has a 95-percent confidence
interval of 88 to 98 percent.
[31] The amendment states that mission order 21 encouraged the
submission of additional data but did not require it. As of September
2006, the mission was awaiting clearance on privacy act and paper
reduction approvals associated with the amendment of mission order 21.
[32] All recipients of grants and cooperative agreements have been
subject to vetting requirements, regardless of the dollar value of the
award, since vetting began in 2001.
[33] One of these three organizations was found to have links to
terrorist organizations upon application for another award.
[34] The vetting management database and the information it contains
are considered unclassified.
[35] The database contains 1670 records associated with organizations
and 8,772 records associated with key individuals.
[36] According to the mission's October 2002 action memorandum,
information in the database should be available only to those with an
official need for access. Much of the information contained in the
database is also contained in these paper files.
[37] According to State Department guidance (12 Foreign Affairs Manual
633.1), under certain conditions, foreign nationals are not to develop,
modify, or perform maintenance on software used on State computer
systems without specific diplomatic security authorization. The
information management officers responsible for State's computer
systems, both in the United States and abroad, must obtain
authorization before such work is begun. USAID's information systems
security personnel stated USAID works to comply with FAM 633.1 and the
mission should have consulted with information security personnel prior
to developing the database.
[38] According to USAID information systems security personnel, the
criteria in effect when the database was developed did not require the
system to be classified as a major application.
[39] USAID Automated Directive 502.5.6a states that USAID database
applications should comply with Code of Federal Regulations (CFR) Title
36,1234.20(b). According to the CFR, agencies must maintain adequate
and up-to-date technical documentation for each electronic information
system that produces, uses, or stores data files.
[40] In database management systems, a data dictionary is a file that
defines the basic organization of a database, including a list of all
files in the database, the number of records in each file, and the
names and types of each field.
[41] Automated Directive System, sec. 545.
[42] A prototype of the system was undergoing refinement and testing in
September 2006.
[43] The certification requirement is in AAPD 02-19 and subsequent
revisions and mission action memorandums. NGOs initially raised
concerns about the language contained in the certification and their
potential liability for subawardee compliance. Some refused to sign it
altogether. Moreover, the Palestinian Legislative Council's Economics
Committee in May 2004 published a report that discouraged Palestinian
NGOs from signing the certification because it considered the
requirement an affront to its sovereignty and did not want any of its
assistance to be conditioned. USAID made revisions to the certification
after lawyers representing NGOs persuaded the agency to change the
language. These changes resulted in more Palestinian NGOs signing the
certifications.
[44] According to the mission, subsequent to our review, the mission
has verified that all current and active awards contain all three
clauses.
[45] USAID did not provide documentation for 24 of the subawards;
consequently, inclusion of the antiterrorism clause could not be
verified.
[46] The mission defines in-kind assistance as assistance provided in
the form of goods and services, such as medical supplies and equipment.
[47] To conduct the audits, up to $1 million was provided in each
fiscal year to the USAID Office of the Inspector General.
[48] In 2003, the RIG issued supplementary guidance to its contract
auditors addressing antiterrorism provisions and also specified
requirements in its contract auditor's statements of work from 2003
through 2005.
[49] The October 2003 guidance to contract auditors stated that the
certification requirement applies to the prime recipients of grants, as
well as to the recipients of grants under contracts, but it does not
apply to subgrantees under grantees.
[50] With a probability sample, each member of the study group (in this
case, the mission's vetting results memorandums) has a known chance of
being selected. Our sample was only one of a large number of samples
that we might have drawn. Since each sample could have provided
different estimates, we express our confidence in the precision of our
particular sample's results as a 95 percent confidence interval. For
this estimate of 94 percent, the confidence interval extends from 88 to
98 percent. This is the interval that would contain the actual
population value for 95 percent of the samples we could have drawn.
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