Foreign Assistance
U.S. Assistance to the West Bank and Gaza for Fiscal Years 2005 and 2006 Gao ID: GAO-07-443R March 5, 2007For decades, the United States has worked toward the resolution of the Israeli-Palestinian conflict, most recently under the 2003 Roadmap for Peace, which calls for an independent Palestinian state coexisting peacefully with the State of Israel. Since fiscal year 1993, the United States has provided more than $2.2 billion in assistance to the West Bank and Gaza to support the Middle East peace process and encourage progress in reforming the Palestinian Authority. In fiscal years 2005 and 2006 alone, the United States provided over $420 million in Economic Support Funds for the West Bank and Gaza; this funding is primarily administered by the U.S. Agency for International Development (USAID). In the conference report accompanying the 2005 supplemental appropriation legislation, the Congress directed that the assistance be allocated to two broad development categories--economic revitalization and infrastructure development--each with five subcategories. In January 2006, Hamas--designated a terrorist organization by the United States and others--won a majority of the seats in the Palestinian parliament. On January 30, 2006, the United Nations (UN), the United States, the European Union, and Russia--known as the Quartet on the Middle East--stated that they would provide support and assistance to the Hamas-led government only if it agreed to nonviolence, to recognize the State of Israel, and to respect previous Israeli-Palestinian peace agreements. In June 2006, the Congress directed that the Department of State (State) submit a new assistance plan. For fiscal years 2005 and 2006, the Congress mandated that the Comptroller General of the United States report to the Congress on U.S. assistance to the West Bank and Gaza. In response to this mandate, we reported in September 2006 on the steps USAID had taken to help ensure that U.S. assistance did not support terrorist activities in the West Bank and Gaza. In this report, also in response to the mandate, we examine the status of (1) USAID's obligations and expenditure of the fiscal years 2005 and 2006 appropriations for the West Bank and Gaza and (2) the fiscal year 2005 supplemental appropriation in greater detail to determine whether USAID allocated the funds in accordance with congressional guidance.
As of December 31, 2006, USAID had obligated $300.8 million and expended $109.1 million of the $422.9 million in assistance provided by the United States to the West Bank and Gaza from fiscal years 2005 and 2006 appropriations. After Hamas won a majority of the seats in the Palestinian parliament in January 2006, USAID slowed and, in April 2006, selectively suspended assistance to the West Bank and Gaza to prevent U.S. assistance from potentially benefiting a terrorist organization. USAID resumed assistance in July 2006 after the Department of State notified the Congress of its new U.S. assistance plan, along with a revised spending plan, for the West Bank and Gaza in response to the June 2006 congressional mandate. The revised spending plan emphasized humanitarian projects, private sector support, and democracy/civil society programs directed to the Palestinian people. In February 2006, USAID requested that the Office of the President of the Palestinian Authority return $50 million in fiscal year 2005 appropriations. The Palestinian Authority returned $45 million, and USAID has since reobligated these funds to other projects. The remaining $5 million funded road projects that USAID canceled. According to a mission official, as of January 30, 2007, USAID and the Palestinian Authority had not yet resolved the value of the pre-cancellation construction, close-out and security costs, and the remaining funds to be returned. USAID obligated the fiscal year 2005 supplemental appropriations for projects in the West Bank and Gaza almost equally between the two congressionally directed categories: economic revitalization and infrastructure development. However, as a result of the parliamentary election and the subsequent shift in U.S. strategy for assistance to the West Bank and Gaza, USAID's obligations to the 10 subcategories differed from the allocations originally put forward by the Congress. Before the election, the U.S. assistance plan supported the administration of the Office of the President of the Palestinian Authority with a wide range of development projects; after the election, all funds going to the Palestinian Authority were canceled or, in the case of existing obligations, withdrawn and funneled through other organizations. Examples of specific projects funded in part with the 2005 supplemental funds include labor-intensive construction projects to improve infrastructure and generate employment, and the training of doctors to improve medical care in the region. The results of these projects included new classrooms being built, doctors being trained, and facilities being rehabilitated.
GAO-07-443R, Foreign Assistance: U.S. Assistance to the West Bank and Gaza for Fiscal Years 2005 and 2006
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March 5, 2007:
The Honorable Patrick J. Leahy:
Chairman:
The Honorable Judd Gregg:
Ranking Minority Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations:
United States Senate:
The Honorable Nita M. Lowey:
Chairman:
The Honorable Frank R. Wolf:
Ranking Minority Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations:
House of Representatives:
Subject: Foreign Assistance: U.S. Assistance to the West Bank and Gaza
for Fiscal Years 2005 and 2006:
For decades, the United States has worked toward the resolution of the
Israeli-Palestinian conflict, most recently under the 2003 Roadmap for
Peace, which calls for an independent Palestinian state coexisting
peacefully with the State of Israel. Since fiscal year 1993, the United
States has provided more than $2.2 billion in assistance to the West
Bank and Gaza to support the Middle East peace process and encourage
progress in reforming the Palestinian Authority.[Footnote 1]
In fiscal years 2005 and 2006 alone, the United States provided over
$420 million in Economic Support Funds[Footnote 2] for the West Bank
and Gaza; this funding is primarily administered by the U.S. Agency for
International Development (USAID). About $200 million of this
assistance was provided through a fiscal year 2005 supplemental
appropriation.[Footnote 3] In the conference report accompanying the
2005 supplemental appropriation legislation, the Congress directed that
the assistance be allocated to two broad development categories--
economic revitalization and infrastructure development--each with five
subcategories.[Footnote 4] The Congress did not provide similar
direction for the remaining funds appropriated in fiscal years 2005 or
2006[Footnote 5]--about $223 million.
In January 2006, Hamas--designated a terrorist organization by the
United States and others--won a majority of the seats in the
Palestinian parliament. On January 30, 2006, the United Nations (UN),
the United States, the European Union, and Russia--known as the Quartet
on the Middle East--stated that they would provide support and
assistance to the Hamas-led government only if it agreed to
nonviolence, to recognize the State of Israel, and to respect previous
Israeli-Palestinian peace agreements.[Footnote 6] In June 2006, the
Congress directed that the Department of State (State) submit a new
assistance plan; State provided that on July 21, 2006.[Footnote 7]
For fiscal years 2005 and 2006, the Congress mandated that the
Comptroller General of the United States report to the Congress on U.S.
assistance to the West Bank and Gaza.[Footnote 8] In response to this
mandate, we reported in September 2006 on the steps USAID had taken to
help ensure that U.S. assistance did not support terrorist activities
in the West Bank and Gaza.[Footnote 9] In this report, also in response
to the mandate, we examine the status of (1) USAID's obligations and
expenditures[Footnote 10] of the fiscal years 2005 and 2006
appropriations for the West Bank and Gaza and (2) the fiscal year 2005
supplemental appropriation in greater detail to determine whether USAID
allocated the funds in accordance with congressional guidance.
To address these objectives, we analyzed data provided by USAID for
fiscal years 2005 and 2006 appropriations for assistance to the West
Bank and Gaza as of December 31, 2006. We asked for and obtained
additional information on how the 2005 supplemental appropriation had
been allocated to the congressionally directed categories and
subcategories. To determine whether the data were sufficiently reliable
for purposes of this report, we interviewed officials at the USAID
mission in Tel Aviv, Israel, about their procedures for entering
contract information into USAID's data system. We also interviewed
USAID officials at the Washington, D.C., headquarters about the
underlying financial data system. We verified much of the USAID project
information with similar data we had developed and verified with USAID
project officers at USAID's Israel mission for a previous engagement
related to awards for the West Bank and Gaza. We determined that the
USAID data were sufficiently reliable for purposes of our report. See
enclosure I for a more detailed description of our scope and
methodology. We conducted our review from October 2006 through March
2007 in accordance with generally accepted government auditing
standards.
Results in Brief:
As of December 31, 2006, USAID had obligated $300.8 million and
expended $109.1 million of the $422.9 million in assistance provided by
the United States to the West Bank and Gaza from fiscal years 2005 and
2006 appropriations. After Hamas won a majority of the seats in the
Palestinian parliament in January 2006, USAID slowed and, in April
2006, selectively suspended assistance to the West Bank and Gaza to
prevent U.S. assistance from potentially benefiting a terrorist
organization. USAID resumed assistance in July 2006 after the
Department of State notified the Congress of its new U.S. assistance
plan, along with a revised spending plan, for the West Bank and Gaza in
response to the June 2006 congressional mandate. The revised spending
plan emphasized humanitarian projects, private sector support, and
democracy/civil society programs directed to the Palestinian people. In
February 2006, USAID requested that the Office of the President of the
Palestinian Authority return $50 million in fiscal year 2005
appropriations. The Palestinian Authority returned $45 million, and
USAID has since reobligated these funds to other projects.[Footnote 11]
The remaining $5 million funded road projects that USAID canceled.
According to a mission official, as of January 30, 2007, USAID and the
Palestinian Authority had not yet resolved the value of the pre-
cancellation construction, close-out and security costs, and the
remaining funds to be returned.
USAID obligated the fiscal year 2005 supplemental appropriations for
projects in the West Bank and Gaza almost equally between the two
congressionally directed categories: economic revitalization and
infrastructure development. However, as a result of the parliamentary
election and the subsequent shift in U.S. strategy for assistance to
the West Bank and Gaza, USAID's obligations to the 10 subcategories
differed from the allocations originally put forward by the Congress.
Before the election, the U.S. assistance plan supported the
administration of the Office of the President of the Palestinian
Authority with a wide range of development projects; after the
election, all funds going to the Palestinian Authority were canceled
or, in the case of existing obligations, withdrawn and funneled through
other organizations. Examples of specific projects funded in part with
the 2005 supplemental funds include labor-intensive construction
projects to improve infrastructure and generate employment, and the
training of doctors to improve medical care in the region. The results
of these projects included new classrooms being built, doctors being
trained, and facilities being rehabilitated.
Background:
The Palestinian territories, comprising the West Bank and Gaza, cover
about 2,400 square miles and have a combined population of 3.8 million
people.[Footnote 12] The Palestinian Authority administers Gaza while
both the Palestinian Authority and Israel administer areas within the
West Bank.
Figure 1: Map of West Bank and Gaza and Surrounding Countries:
[See PDF for Image]
Source: GAO (data); CIA and Map Resources (map).
[End of figure]
In 1993, the Oslo Peace Accords[Footnote 13] were signed, and USAID
established its West Bank and Gaza mission. 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 for a strategy called the Roadmap for Peace.
The Quartet on the Middle East,[Footnote 14]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
parliament.
Since establishing its mission in the West Bank and Gaza in September
1993, USAID has directed assistance to the Palestinians toward five
development sectors: economic growth, water and infrastructure,
democracy and governance, health, and higher education. It has
supported these objectives through efforts such as job creation
programs, construction of reservoirs and roads, election support
projects, projects to improve maternal and child health, and university
scholarship programs.
The January 2006 Elections:
In January 2006, Hamas won a majority of the seats in the Palestinian
parliament. On January 30, 2006, the Quartet on the Middle East stated
that its members would continue to provide support and assistance to
the Hamas-led government only if the government would agree to
nonviolence, recognize the State of Israel, and respect previous
Israeli-Palestinian peace agreements. As of March 2006, Hamas had not
accepted these conditions.
In June 2006, the Congress directed that no Economic Support Funds in
2006 or any prior appropriation for foreign operations, export
financing, and related programs be obligated for assistance to the West
Bank and Gaza until the Secretary of State reported to the
appropriations committees (1) how the funds would be spent and (2) that
appropriate measures were in place to ensure that no funds would
support terrorist activities.[Footnote 15] The Department of State
released its new assistance plan on July 21, 2006.
Status of U.S. Assistance to the West Bank and Gaza for Fiscal Years
2005 and 2006:
In fiscal years 2005 and 2006, the United States provided a total of
$422.9 million in bilateral assistance to the West Bank and Gaza
through three separate appropriations.[Footnote 16] After Hamas won a
majority in the Palestinian parliament in January 2006, USAID slowed
aid pending a review of how to proceed.
Fiscal Years 2005 and 2006 Appropriations:
As of December 31, 2006, USAID had obligated $300.8 million and
expended $109.1 million of the total U.S. assistance provided to the
West Bank and Gaza in fiscal years 2005 and 2006. (See table 1.)
Table 1: U.S. Appropriations, Obligations, and Mission Expenditures for
West Bank and Gaza, Fiscal Years 2005 and 2006:
Dollars in millions:
Fiscal year 2005;
Appropriations: $74.4;
Obligations: $74.4[A];
Expenditures: $27.6.
Fiscal year 2005 supplemental;
Appropriations: 200.0;
Obligations: 200.0[B];
Expenditures: 79.4.
Fiscal year 2006;
Appropriations: 148.5[C];
Obligations: 26.4;
Expenditures: 2.1.
Total;
Appropriations: $422.9;
Obligations: $300.8;
Expenditures: $109.1.
Source: USAID:
[A] Includes a $36 million transfer to the United Nation Relief and
Works Agency that is not reflected in mission expenditures.
[B] Includes $27.35 million in Washington, D.C.-based obligations that
are not reflected in mission expenditures.
[C] Includes $33.3 million in direct allocations to other agencies.
Note: Economic Support Funds are available for 2 years for obligation
and for 5 years for expenditure. Expenditures are exclusively mission-
directed project expenditures.
[End of table]
The combined total 2005 appropriations 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, among other purposes, to
support the President of the Palestinian Authority, elected in January
2005, and to facilitate the Israeli disengagement from four northern
West Bank settlements and Gaza.
² In December 2004, the United States provided $75 million in
assistance to the West Bank and Gaza through the fiscal year 2005
annual appropriation. A subsequent 0.8 percent rescission reduced that
appropriation to $74.4 million.
² In May 2005, the United States provided an additional $200 million to
the West Bank and Gaza in a fiscal year 2005 supplemental
appropriation, which was accompanied by a conference report that
allocated the funds to 10 different subcategories[Footnote 17] under
the two broad categories of economic revitalization and infrastructure
development.
Additionally, in November 2005, the United States provided $150 million
in assistance to the West Bank and Gaza through the fiscal year 2006
annual appropriation. A subsequent 0.99 percent rescission reduced that
to $148.5 million. The legislation authorizing the 2006 assistance did
not contain the same congressional directives relating to categories of
assistance as the conference report accompanying the fiscal year 2005
supplemental appropriation.
USAID Response to the Change in the U.S. Assistance Plan for the West
Bank and Gaza:
After the January 2006 parliamentary elections, USAID slowed assistance
to the West Bank and Gaza pending a comprehensive review. In April
2006, in concert with State, USAID notified its implementing partners
that it intended to suspend certain activities. On July 21, 2006, the
Secretary of State issued a new assistance plan with a revised spending
plan totaling $468 million,[Footnote 18] about a third of which had
previously been obligated, focused primarily on democracy and
governance, health, and higher education. This revised spending plan
affected the use of all three appropriations from fiscal years 2005 and
2006.
USAID Deobligated Certain Funds from the Fiscal Year 2005 Annual
Appropriation:
Along with the revised spending plan, USAID requested the return of $50
million from its fiscal year 2005 annual appropriation of $74.4 million
that had been obligated for the use of the Palestinian Authority.
Between March 1, 2006, and May 8, 2006, the Palestinian Authority
returned a total of $45 million, which USAID reobligated. The remaining
$5 million funded road projects that USAID canceled. According to a
mission official, as of January 30, 2007, USAID and the Palestinian
Authority had not yet resolved the value of the pre- cancellation
construction, close-out and security costs, and the remaining funds to
be returned.
USAID Shifted the Emphasis of the Remaining 2005 Supplemental
Appropriations:
USAID's obligations of U.S. assistance to the West Bank and Gaza varied
from the allocations set forth in the conference report to the fiscal
year 2005 supplemental appropriation because the revised assistance
plan that State presented to the Congress on July 21, 2006, redirected
some funds to humanitarian assistance. While U.S. assistance before the
January 2006 election supported the administration of the Office of the
President of the Palestinian Authority with a wide range of development
projects, all funds going to the Palestinian Authority after the
election were canceled or, in the case of some obligations, withdrawn
and funneled through other organizations. For example, State notified
the Congress that food fortification and nutrition management programs
would be redirected from the Palestinian Ministry of Health to
individual private mills and the Palestinian Association of Food
Industries. Funds for one existing activity were redirected away from
pubic infrastructure works to ensure that the Palestinian government
would not benefit and to shift support away from the Palestinian
Authority. As of December 31, 2006, USAID had obligated the full $200
million from the supplemental appropriation. Those obligations included
$27.35 million made by USAID in Washington, D.C. The West Bank and Gaza
mission expended about $79.4 million.
State Retained a Significant Proportion of Fiscal Year 2006 Funds
Appropriated for Use in the West Bank and Gaza:
In its July 2006 revised spending plan, State notified the Congress of
its intent to retain approximately $83 million of the $148.5 million
fiscal year 2006 appropriation for the West Bank and Gaza, transfer or
directly provide about $33 million to other U.S. entities,[Footnote 19]
and allocate $31.9 million to USAID's West Bank and Gaza mission. As of
December 31, 2006, USAID had obligated approximately $26.4 million and
expended approximately $2.1 million in fiscal year 2006 funds for
projects in the West Bank and Gaza. On January 30, 2007, State notified
the Congress of its intent to obligate $86.4 million in fiscal year
2006 funds to carry out security measures in the West Bank and Gaza. As
of the date of this report, the Congress and State continue to discuss
the use of those funds and, as a result, these funds have not been
obligated.
USAID-Funded Projects Highlight Areas of Humanitarian Aid and
Infrastructure Development:
After the election and the change in the U.S. assistance plan for the
West Bank and Gaza, USAID restructured its assistance to place an
increased emphasis on humanitarian projects and to shift funds away
from the Palestinian Authority. The West Bank and Gaza mission provided
us with detailed information about the use of the fiscal year 2005
supplemental funds for the 10 subcategories of assistance directed by
the Congress. Table 2 shows these subcategories for the fiscal year
2005 supplemental appropriation with USAID's actual obligations of
those funds, the percentage differences between the congressional
direction and USAID's obligations, and USAID's expenditures. It should
be noted that the table displays the congressional allocations
(determined prior to the January 2006 election) and USAID West Bank and
Gaza mission obligations and expenditures (as of December 31, 2006),
which reflect USAID's restructured plan after the election.
Table 2: U.S. Economic Support Funds Obligated per Congressional
Allocation for the West Bank and Gaza, Fiscal Year 2005 Supplemental
Appropriation, as of December 31, 2006:
Dollars in thousands:
Category and subcategory: Economic revitalization post-disengagement;
Congressional allocation: $110,000;
Obligations: $101,291;
Percentage difference from congressional allocation: (8);
Expenditures[A]: $35,729.
Category and subcategory: Support for production and marketing in
Palestinian agriculture;
Congressional allocation: 15,000;
Obligations: 15,209;
Percentage difference from congressional allocation: 1;
Expenditures[A]: 9,219.
Category and subcategory: Trade promotion and capacity building;
Congressional allocation: 24,000;
Obligations: 6,693;
Percentage difference from congressional allocation: (30);
Expenditures[A]: 8,932.
Category and subcategory: Home construction financing;
Congressional allocation: 1,000;
Obligations: 1,000;
Percentage difference from congressional allocation: 0;
Expenditures[A]: 989.
Category and subcategory: Job creation, with emphasis on construction
of schools and community centers;
Congressional allocation: 20,000;
Obligations: 18,389;
Percentage difference from congressional allocation: (8);
Expenditures[A]: 5,284.
Category and subcategory: Improved flow of people and goods;
Congressional allocation: 50,000;
Obligations: 50,000;
Percentage difference from congressional allocation: 0;
Expenditures[A]: 11,305.
Category and subcategory: Economic, social, political, and security
infrastructure development;
Congressional allocation: 90,000;
Obligations: 98,709;
Percentage difference from congressional allocation: 10;
Expenditures[A]: 43,712.
Category and subcategory: Basic infrastructure (roads and water);
Congressional allocation: 48,500;
Obligations: 33,196;
Percentage difference from congressional allocation: (32);
Expenditures[A]: 18,181.
Category and subcategory: Democratic reform and government;
Congressional allocation: 17,500;
Obligations: 14,932;
Percentage difference from congressional allocation: (15);
Expenditures[A]: 7,232.
Category and subcategory: Support to confront terror and violence;
Congressional allocation: 3,000;
Obligations: 3,500;
Percentage difference from congressional allocation: 17;
Expenditures[A]: 2,415.
Category and subcategory: Expanding education opportunities;
Congressional allocation: 8,000;
Obligations: 6,032;
Percentage difference from congressional allocation: 25;
Expenditures[A]: 1.285.
Category and subcategory: Provision of social services to the poor;
Congressional allocation: 13,000;
Obligations: 41,048;
Percentage difference from congressional allocation: 215;
Expenditures[A]: 14,599.
Total;
Congressional allocation: $200,000;
Obligations: $200,000;
Percentage difference from congressional allocation: 0;
Expenditures[A]: $79,441.
Source: USAID (data) and GAO (analysis).
[A] Expenditures are exclusive to the USAID mission in the West Bank
and Gaza and do not include USAID expenditures by its Washington, D.C.
headquarters officials. The mission is wholly responsible for project
expenditures.
[End of table]
USAID obligated the $200 million fiscal year 2005 supplemental
appropriation almost equally between the two congressionally directed
categories. USAID further obligated the funds to approximately 40
different awards under the 10 subcategories directed by the Congress,
including some ongoing contracts that had been initiated as early as
2004. The average award size was about $4.2 million. As discussed
earlier, the January 2006 parliamentary election resulted in USAID
shifting the focus of its assistance to humanitarian projects. For
example, following the redirection of funds, the category receiving the
largest funding was health care and food assistance projects ($41
million). A $50 million allocation to border security measures--labeled
"improved flow of people and goods" in table 2--was specified in the
congressional allocations and was not affected by the change in the
U.S. assistance plan for the West Bank and Gaza.
Based on information provided by the West Bank and Gaza mission, 13
awards had been completed for projects using some portion of the fiscal
year 2005 supplemental appropriation funds. We selected two awards that
were completed or well established with preliminary results from each
of the two major congressional categories--economic revitalization and
infrastructure development--in order to get a cross section of the
types of projects being completed. The four awards represented projects
classified under 4 of the 10 congressional subcategories set out in the
fiscal year 2005 supplemental appropriations conference report.
Descriptions of the projects we chose follow.
Palestinian Economic Opportunity Program for Lending and Economic
Development:
USAID awarded a total of $8.6 million, including $1 million in fiscal
year 2005 supplemental funds, to a contractor to continue its
Palestinian Economic Opportunity for Lending and Economic Development
program. This program seeks to provide housing solutions that are
technically appropriate and meet basic standards of livability and
safety. The program gives 12-to 42-month microfinance loans for home
improvements to low-income Palestinians to repair, expand, or improve
their homes. All loans are extended at market rates and under strict
repayment conditions to families with a demonstrated ability to repay.
Monthly loan installments are limited to 33 percent of income to ensure
repayment capacity. Since the program began, the contractor has opened
site offices in Ramallah, Nablus, Hebron, Khan Younis, Jenin,
Bethlehem, and Tulkarem and hired qualified staff in all required
positions. According to USAID reports, as of September 30, 2006, the
program had disbursed home improvement loans totaling $21.7 million and
generated over 648,000 person days of employment, almost exclusively in
the construction sector, far exceeding the 595,200 days projected by
the contractor.
Partnership for Expanded Access to Quality Maternal and Neonatal Health
Care for Palestinian Women and Infants:
USAID awarded a total of $3.5 million, all in fiscal year 2005
supplemental funds, to the Holy Family Hospital of Bethlehem for a
project to provide quality maternal and child health services,
especially for high-risk pregnancies and newborns. The project also
seeks to expand its current services in response to evolving community
needs, promote sustainability of the facility's specialized care
capacity, and enhance the quality of existing maternal and neonatal
services. Project components included expanded access to advanced
neonatal health care, expanded access to gynecology services, expanded
access to health education services for families, expanded access to
training for health care professionals, and expanded support for
essential equipment and supplies. According to USAID, program
achievements, as of September 30, 2006, include the following:
² a contract was awarded for the construction of a labor ward,
emergency department, and nursery/day care unit, with construction
started on the new labor ward;
² a new part-time gynecologist was hired for the Well Women program;
² two obstetric/gynecologist resident doctors began board certification
training;
² two pediatric resident doctors were chosen and began to receive long-
term training;
² three student midwives were currently studying at Bethlehem
University; and:
² the hospital procured a vehicle and medical equipment.
Labor-intensive Building for Education, Recreation, and Training of
Youth:
USAID awarded a total of almost $2 million, including about $184,000
from fiscal year 2005 supplemental funds, to a contractor to improve
educational and youth infrastructure, thereby generating critically
needed employment in the most deprived areas of Gaza. This program also
leveraged an additional $800,000 from other sources to increase the
scope of activities. According to USAID, the program provided immediate
job opportunities for Palestinians in southern Gaza through a series of
labor-intensive infrastructure interventions that generated
approximately 48,000 days of employment. These interventions included
the building of classrooms and the beautification and rehabilitation of
local schools. The program also improved educational and youth
facilities through the implementation of several educational
infrastructure development projects including the construction,
expansion, renovation and minor upgrading of several schools and the
construction of multipurpose youth centers and kindergartens. According
to USAID reports,
² 86 classrooms were built,
² 20 schools were beautified,
² 22 additional classrooms were rehabilitated,
² 1 multipurpose hall was constructed,
² 3 sports fields and 3 sanitation units were built,
² 4 new kindergartens were constructed, and:
² 2 youth and sporting clubs were rehabilitated.
Emergency Assistance to Palestinians through Nongovernmental
Organizations:
USAID awarded a total of $28.2 million, including $7 million in fiscal
year 2005 supplemental funds, to a contractor to extend its Emergency
Assistance through Nongovernmental Organizations program. According to
USAID, this program provided highly targeted grants to address urgent
needs of Palestinians in the West Bank and Gaza, using existing locally
based nongovernmental organizations of various sizes and capabilities
as the main vehicle for service delivery. Emphasis was placed on
reaching the poorest sectors and marginalized groups of Palestinian
citizens, frequently those living in remote areas, enclaves that
experienced recurrent and prolonged closures, and regions severely
affected by occupation. Over 100 subprojects valued at $10.2 million
have been completed or are being implemented, addressing general
humanitarian assistance, environment, education, infrastructure,
conflict mitigation, economic growth, and health. Activities supported
include aid to the disabled, agricultural revitalization, shelter for
the abused, and basic social services infrastructure. Specific projects
included the following:
² supporting the establishment of a Palestinian pediatric surgery unit
to provide high-quality heart surgery for children in Palestinian
hospitals;
² establishing the first Palestinian eye bank and helping raise the
awareness of the importance of corneal donations;
² providing sunshades and water fountains for six schools; and:
² constructing, maintaining and improving sanitary units, washing
facilities, drinking water taps, classrooms, playgrounds, and outdoor
spaces at 11 public schools.
Agency Comments:
USAID provided written comments on a draft of this report (see enc.
II). Overall, USAID was pleased that the report emphasized the changed
political situation following the January 2006 parliamentary elections
and the resultant shift in the allocation of resources. USAID also
provided two clarifications that we incorporated. In addition, USAID
provided technical comments and updates, which we have incorporated
throughout the report as appropriate.
Copies of this report are being sent to the Secretary of State, the
Director of Foreign Assistance and USAID Administrator, 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
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.
Signed by:
David Gootnick:
Director, International Affairs and Trade:
[End of section]
Enclosure I: Scope and Methodology:
To determine the status of appropriations, obligations, and
expenditures of the U.S. Agency for International Development (USAID)
assistance to the West Bank and Gaza in fiscal years 2005 and 2006, we
relied on appropriations legislation, including related conference
reports, and USAID data provided separately by USAID's West Bank and
Gaza mission (the mission) and USAID's Washington, D.C., headquarters.
The mission is responsible for allocating its appropriated funds to
specific projects in the West Bank and Gaza, and headquarters controls
obligations of funds to the Palestinian Authority and other
institutions, such as the Office of Transition Initiatives at USAID.
The mission provided data on obligations and disbursements for each
contract and specific information on its management of each contract
(the start and end dates and specific appropriations that funded each
contract). We reviewed legislative documents to determine congressional
policy goals for assistance to the West Bank and Gaza and changes in
those goals after the election of Hamas to the Palestinian parliament.
The mission and Washington, D.C., USAID officials described the steps
they took immediately after the January 2006 parliamentary election and
later actions in response to congressional legislation and the
Department of State's new U.S. assistance plan for the West Bank and
Gaza. Headquarters staff provided supporting documentation for
notifications to the Congress on the revised spending plan for the West
Bank and Gaza released in July 2006.
To determine USAID's use of the fiscal year 2005 supplemental
appropriations and whether it obligated the funds in response to the
congressional guidance, we reviewed legislative documents and detailed
data provided by the mission, including information on specific awards
as of December 31, 2006. To assess the reliability of the data provided
by mission and headquarters staff, we spoke with agency officials at
headquarters and reviewed technical documentation about the agency data
systems. We also conducted interviews with mission staff to determine
how they implemented USAID operating procedures for entering,
verifying, and processing data. For purposes of this report, we
determined that USAID's data were sufficiently reliable. For the
project information that we include in this report, we relied on data
provided by the mission. Because the Congress allocated funds to 10
categories of assistance, the mission had detailed data for projects
using fiscal year 2005 supplemental funds. We examined the start and
end dates for all projects to identify projects that had been under way
long enough to demonstrate results. We also interviewed mission staff
on the status of projects, and the mission provided us with quarterly
reports of the project results. We verified much of the information
provided with similar data we developed and verified with USAID project
officers at its Israel mission for a previous engagement related to
awards for the West Bank and Gaza. These data provided award amounts
and contractor information.
[End of section]
Enclosure II: USAID's Comments:
USAID:
From The American People:
Feb 2 8 2007:
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: USAID Assistance to the West Bank and Gaza for Fiscal Years
2005 and 2006 (GAO-07-443R) (March 2007). I would like to thank the GAO
staff for their hard work and professionalism. The USAID staff enjoyed
working with GAO on this report and appreciates the highlights of some
of our most important project accomplishments. USAID is particularly
pleased that the GAO emphasized the change in the political situation
that took place following the January 2006 Palestinian parliamentary
elections which resulted in a major shift in the allocation and
obligation of resources.
Statements Requiring Clarification:
The draft report includes a few statements that warrant clarification,
including the following:
1. FY 2006 Allocations and Obligations:_ On page 10, second paragraph,
the report discusses FY 2006 obligations and expenditures. USAID feels
it is important to note that while $150 million was originally
appropriated to fund U.S. efforts in the West Bank and Gaza for FY
2006, the Secretary of State retained $83 million of that amount
pending a decision about how to proceed given the political ascendancy
of Hamas. The State Department also transferred an additional $35
million to other entities such as the Overseas Private Investment
Corporation, Office of Middle East Partnership Initiatives, Office of
Inspector General and Office of Transition Initiatives.
While some of this money may have benefited the West Bank and Gaza
program, none of these funds are accounted for at the Mission level.
Only the remaining $32 million in FY 2006 funds was actually allowed to
the USAID Mission for implementation. Although USAID halted assistance
to the Palestinian Authority in March 2006, the Mission was able to
obligate over $25 million of the $32 million the State Department
allocated to the Mission in accordance with the Secretary of State's
revised Palestinian Assistance Strategy from July 2006. The funds were
obligated and approximately $2.1 million expended for projects in the
West Bank and Gaza as of December 31, 2006.
2. USAID suspension of activities: On page three, second sentence under
Results in Brief, the report states that between January 2006 and July
2006 USAID halted assistance to the West Bank and Gaza. This same
assertion is made in the middle of page seven. On page nine the report
states USAID did not make a single obligation for six months. This
depiction of events is not correct. Many activities slowed down after
the elections due to uncertainties, but official U.S. government action
took place only after Hamas took power in March. In concert with the
Secretary of State's announcement on April 7, 2006, USAID sent out a
notice on April 26, 2006 to partners detailing our intent to
selectively suspend activities. With the agreement of the State
Department, USAID then took actions (a) to close out selected
activities which no longer met program requirements, and (b) to
continue food aid activities as well as other activities (e.g., health
activities) that had "notwithstanding authority" associated with their
funding.
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:
Mosina H. Jordan:
Counselor to the Agency:
GAO's comments on USAID's letter:
The following are GAO's comments on USAID's letter dated February 28,
2007.
We added information to this report regarding State's decision to
retain:
$83 million out of the total $150 million for fiscal year 2006 in the
West Bank and Gaza.
We modified the text to reflect USAID's comment.
Enclosure III: GAO Contact and Staff Acknowledgments:
GAO Contact:
David Gootnick (202) 512-3149:
Staff Acknowledgments:
Albert H. Huntington, III; Judith K. Knepper; and Michael Maslowski
made key contributions to this report. In addition, David M. Bruno,
Martin de Alteriis, Etana Finkler, Reid L. Lowe, and Grace P. Lui
provided technical assistance.
(320460):
FOOTNOTES
[1] These funds included $121 million in direct budget support for the
Palestinian Authority and $1.3 billion to the United Nations Relief and
Works Agency.
[2] According to a Department of State publication, 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. Also,
legislation authorizing the Economic Support Fund provides 2 years to
obligate the funds; that is, USAID does not have to obligate the funds
appropriated in fiscal year 2005 until the end of fiscal year 2006, or
September 30, 2006. In addition, none of the funds appropriated for
assistance under the West Bank and Gaza program may be made available
for the purpose of recognizing or otherwise honoring individuals who
commit, or have committed, acts of terrorism (Consolidated
Appropriations Act of 2005, Pub. L. No. 109-102, § 559(c), 118 Stat.
2809, 3019 (2004)).
[3] Emergency Supplemental Appropriations Act for Defense, the Global
War on Terror, and Tsunami Relief, 2005, Pub. L. No. 109-13, 119 Stat.
231 (2005).
[4] H.R. Conf. Rep. No. 109-72, at 132 (2005).
[5] Pub. L. No. 108-447, 118 Stat. 2809 (2004) and Consolidated
Appropriations Act of 2006, Pub. L. No. 109-102, 119 Stat. 2172 (2005).
[6] As of March 1, 2006, Hamas had not accepted these conditions.
[7] 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).
[8] Pub. L. No. 109-13, § 2103, 119 Stat. at 266; Pub. L. No. 109-102,
§ 559, 119 Stat. at 2222.
[9] GAO, 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, (Washington, D.C.: Sept. 29, 2006).
[10] In this report, we use "expenditures" to mean cash disbursements.
[11] According to a USAID mission official, the Palestinian Ministry of
Finance returned $30 million on March 1, 2006, and $15 million on May
8, 2006.
[12] 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.
[13] The accords called for the withdrawal of Israeli forces from parts
of Gaza and the West Bank and affirm 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 no later than May 1996).
[14] The quartet is involved in mediating the peace process between the
State of Israel and the Palestinian Authority.
[15] Pub. L. No. 109-234, §1304, 120 Stat. at 435.
[16] Pub. L. No. 108-447; § 595, 118 Stat. at 3039; Pub. L. No. 109-13,
§ 2111, 119 Stat. at 268; and Pub. L. No. 109-102 § 596, 119 Stat. at
2239.
[17] The 10 subcategories are (1) Palestinian agriculture and
agribusiness production and marketing; (2) trade promotion and capacity
building; (3) home construction financing; (4) job creation, with an
emphasis on construction of schools and community centers; (5) improved
flow of people and goods into Israel; (6) roads and water; (7)
democratic reform and the rule of law; (8) community policing;
(9) education, including vocational training; and (10) health care and
food assistance.
[18] Although the fiscal year 2006 supplemental appropriation act
required a revised plan for unobligated Economic Support Funds for the
West Bank and Gaza, State also included some programs funded from other
sources or from already obligated Economic Support Funds in the revised
spending plan.
[19] These included the Overseas Private Investment Corporation,
USAID's Office of Transition Initiatives, and State's Near East Asia
Middle East Peace Initiative, among others.
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