Foreign Assistance
Measures to Prevent Inadvertent Payments to Terrorists under Palestinian Aid Programs Have Been Strengthened, but Some Weaknesses Remain Gao ID: GAO-09-622 May 19, 2009The U.S. government is one of the largest donors to Palestinians. It provided nearly $575 million in assistance in fiscal year 2008. This assistance is provided through the U.S. Agency for International Development (USAID) and through contributions to international organizations, primarily the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). The Department of State (State) oversees U.S. contributions to UNRWA. To help ensure that U.S. funds for these programs are not provided to individuals or entities engaged in terrorist activities, USAID and State must comply with restrictions under U.S. law. GAO was asked to (1) assess the extent to which USAID has complied with its antiterrorism policies and procedures and (2) assess State's and UNRWA's policies and procedures to support conformance with U.S. statutory conditions. GAO reviewed U.S. and UNRWA documents; interviewed USAID, State, and UNRWA officials; and conducted fieldwork in Israel, Jerusalem, and Jordan.
USAID strengthened its antiterrorism policies and procedures and complied with them in making new prime awards, but had weaknesses related to compliance at the subaward level. ("Prime awardee" refers to an organization that directly receives USAID funding to implement projects. "Subawardee" refers to an organization that receives funding from prime awardees.) USAID strengthened its policies and procedures in response to our 2006 recommendations by, for example, strengthening its vetting process, which involves investigating a person or entity for links to terrorism. Since 2006, USAID has instituted new procedures to monitor prime awardee compliance with antiterrorism requirements, which have allowed it to take some actions to address areas of concern. The agency has hired a specialist who reviews prime awardees' subaward files for compliance with its antiterrorism policies. All 32 new prime awards made by USAID in fiscal year 2008 included all applicable clauses. USAID obtained the applicable antiterrorism certifications and conducted required vetting for all applicable new prime awards. For a random sample of fiscal year 2008 subawards, applicable antiterrorism certifications were obtained and vetting was conducted. However, an estimated 17 percent of subawards had insufficient evidence to assess compliance related to mandatory clauses. For the remaining subawards, an estimated 5 percent did not contain the mandatory clauses at the time of the award. GAO also found limitations in the agency's monitoring of subawards for inclusion of mandatory clauses. Since 2003, State and UNRWA have strengthened policies and procedures to conform with conditions on U.S. contributions to UNRWA, but weaknesses remain. Section 301(c) of the Foreign Assistance Act of 1961, as amended, prohibits U.S. contributions to UNRWA except on the condition that UNRWA take all possible measures to assure that no part of the U.S. contribution shall be used to furnish assistance to, among others, any refugee who has engaged in any act of terrorism. UNRWA has agreed to conform to conditions on U.S. contributions, but State has not established criteria to determine whether UNRWA's actions are consistent with this agreement. While State has not defined the key term "all possible measures" or defined nonconformance, it has strengthened some policies and procedures to oversee UNRWA's conformance. UNRWA has strengthened policies and procedures to promote neutrality of its beneficiaries, staff, contractors, and facilities that cover a broader range of conduct than covered in section 301(c). UNRWA reported denying approximately 110 applications for cash assistance to refugees since July 2006, because the agency found the refugees' behavior was inconsistent with UN neutrality or restrictions related to section 301(c). However, limitations exist. UNRWA said it has screened all staff, contractor, and beneficiary names against a UN Security Council list of potential terrorists and found no matches. However, the list does not include Hamas and Hezbollah, which the United States has designated as foreign terrorist organizations. Finally, internal UNRWA audits do not assess controls for all cash assistance programs or whether contracts contain antiterrorism clauses.
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-09-622, Foreign Assistance: Measures to Prevent Inadvertent Payments to Terrorists under Palestinian Aid Programs Have Been Strengthened, but Some Weaknesses Remain
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
May 2009:
Foreign Assistance:
Measures to Prevent Inadvertent Payments to Terrorists under
Palestinian Aid Programs Have Been Strengthened, but Some Weaknesses
Remain:
GAO-09-622:
GAO Highlights:
Highlights of GAO-09-622, a report to congressional committees.
Why GAO Did This Study:
The U.S. government is one of the largest donors to Palestinians. It
provided nearly $575 million in assistance in fiscal year 2008. This
assistance is provided through the U.S. Agency for International
Development (USAID) and through contributions to international
organizations, primarily the United Nations Relief and Works Agency for
Palestine Refugees in the Near East (UNRWA). The Department of State
(State) oversees U.S. contributions to UNRWA. To help ensure that U.S.
funds for these programs are not provided to individuals or entities
engaged in terrorist activities, USAID and State must comply with
restrictions under U.S. law. GAO was asked to (1) assess the extent to
which USAID has complied with its antiterrorism policies and procedures
and (2) assess State‘s and UNRWA‘s policies and procedures to support
conformance with U.S. statutory conditions. GAO reviewed U.S. and UNRWA
documents; interviewed USAID, State, and UNRWA officials; and conducted
fieldwork in Israel, Jerusalem, and Jordan.
What GAO Found:
USAID strengthened its antiterrorism policies and procedures and
complied with them in making new prime awards, but had weaknesses
related to compliance at the subaward level. (’Prime awardee“ refers to
an organization that directly receives USAID funding to implement
projects. ’Subawardee“ refers to an organization that receives funding
from prime awardees.) USAID strengthened its policies and procedures in
response to our 2006 recommendations by, for example, strengthening its
vetting process, which involves investigating a person or entity for
links to terrorism. Since 2006, USAID has instituted new procedures to
monitor prime awardee compliance with antiterrorism requirements, which
have allowed it to take some actions to address areas of concern. The
agency has hired a specialist who reviews prime awardees‘ subaward
files for compliance with its antiterrorism policies. All 32 new prime
awards made by USAID in fiscal year 2008 included all applicable
clauses. USAID obtained the applicable antiterrorism certifications and
conducted required vetting for all applicable new prime awards. For a
random sample of fiscal year 2008 subawards, applicable antiterrorism
certifications were obtained and vetting was conducted. However, an
estimated 17 percent of subawards had insufficient evidence to assess
compliance related to mandatory clauses. For the remaining subawards,
an estimated 5 percent did not contain the mandatory clauses at the
time of the award. GAO also found limitations in the agency‘s
monitoring of subawards for inclusion of mandatory clauses.
Since 2003, State and UNRWA have strengthened policies and procedures
to conform with conditions on U.S. contributions to UNRWA, but
weaknesses remain. Section 301(c) of the Foreign Assistance Act of
1961, as amended, prohibits U.S. contributions to UNRWA except on the
condition that UNRWA take all possible measures to assure that no part
of the U.S. contribution shall be used to furnish assistance to, among
others, any refugee who has engaged in any act of terrorism. UNRWA has
agreed to conform to conditions on U.S. contributions, but State has
not established criteria to determine whether UNRWA‘s actions are
consistent with this agreement. While State has not defined the key
term ’all possible measures“ or defined nonconformance, it has
strengthened some policies and procedures to oversee UNRWA‘s
conformance. UNRWA has strengthened policies and procedures to promote
neutrality of its beneficiaries, staff, contractors, and facilities
that cover a broader range of conduct than covered in section 301(c).
UNRWA reported denying approximately 110 applications for cash
assistance to refugees since July 2006, because the agency found the
refugees‘ behavior was inconsistent with UN neutrality or restrictions
related to section 301(c). However, limitations exist. UNRWA said it
has screened all staff, contractor, and beneficiary names against a UN
Security Council list of potential terrorists and found no matches.
However, the list does not include Hamas and Hezbollah, which the
United States has designated as foreign terrorist organizations.
Finally, internal UNRWA audits do not assess controls for all cash
assistance programs or whether contracts contain antiterrorism clauses.
What GAO Recommends:
To strengthen compliance, GAO recommends that the Administrator of
USAID improve monitoring of subawards. GAO also recommends that the
Secretary of State consider taking additional steps to oversee UNRWA‘s
conformance with U.S. conditions on funding. USAID, State, and UNRWA
said they are taking actions to implement GAO‘s recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-09-622] or key
components. For more information, contact Thomas Melito at (202) 512-
9601 or melitot@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
USAID Strengthened Its Antiterrorism Policies and Procedures and
Complied with Them in Making New Prime Awards, but Has Weaknesses in
Compliance at the Subaward Level:
State and UNRWA Have Strengthened Policies and Procedures to Determine
Whether UNRWA's Actions Are Consistent with Its Agreement to Conform
with Conditions for Receiving U.S. Funds, but Weaknesses Remain:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
USAID Policies and Procedures:
UNRWA Policies and Procedures:
Appendix II: USAID Mission to the West Bank and Gaza Vetting Process:
Appendix III: UNRWA Policies and Procedures for Cash Assistance, Staff
Neutrality, Use of UNRWA Facilities, and Contractor Behavior:
Policies for Cash Assistance to Refugees:
Policies and Procedures to Promote UNRWA Staff Neutrality:
Rules and Regulations for the Use of UNRWA Facilities by Outside
Entities:
Policies and Procedures Regarding Contractor Behavior:
Appendix IV: Comments from the U.S. Agency for International
Development:
Appendix V: Comments from the U.S. Department of State:
Appendix VI: Comments from the United Nations Relief and Works Agency
for Palestine Refugees in the Near East:
Appendix VII: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Key Features of USAID and UNRWA Programs for Assistance to
Palestinians:
Figure:
Figure 1: USAID's Vetting Process for Awards to Aid Palestinians,
Fiscal Year 2008:
Abbreviations:
OFAC: U.S. Department of Treasury's Office of Foreign Assets Control:
OSO: Operation Support Officer:
PRM: State Department Bureau of Population, Refugees and Migration:
PSU: Program Support Unit:
PVS: Partner Vetting System:
State: U.S. Department of State:
the mission: USAID Mission to the West Bank and Gaza:
UN: United Nations:
UN 1267 list: Al-Qaida and Taliban Sanctions Committee Consolidated
List:
UNRWA: United Nations Relief and Works Agency for Palestine Refugees in
the Near East:
USAID: U.S. Agency for International Development:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
May 19, 2009:
Congressional Committees:
For decades, the United States has played a leading role in efforts to
resolve the Israeli-Palestinian conflict. Since 1948, Palestinians in
the West Bank, Gaza, and neighboring countries have received education,
economic revitalization, health services, and infrastructure
assistance. The U.S. government is one of the largest donors to
Palestinians. It provided nearly $575 million in assistance in fiscal
year 2008. This assistance is mainly provided bilaterally, through the
U.S. Agency for International Development (USAID), and multilaterally,
through contributions to international organizations, primarily the
United Nations Relief and Works Agency for Palestine Refugees in the
Near East (UNRWA). The Department of State (State) oversees U.S.
contributions to UNRWA. The bilateral and multilateral aid programs
differ substantially in their methods of providing assistance. For
example, while USAID relies heavily on contractors[Footnote 1] to
implement projects that improve the welfare of Palestinians, such as
building water distribution networks, UNRWA hires nearly 30,000
employees to directly provide social and humanitarian services, such as
education and health care. To help ensure that U.S. funds for these
programs are not provided to individuals or entities engaged in
terrorist activities, USAID and State must comply with restrictions
under U.S. law when providing funds for Palestinian assistance
programs.
The Consolidated Appropriations Act of 2008[Footnote 2] directs the
Comptroller General to conduct an audit and an investigation of the
treatment, handling, and uses of all funds for the bilateral West Bank
and Gaza Program in fiscal year 2008 under the Economic Support Fund,
including an assessment of the extent to which this program has
complied with the requirements attached to these funds in this
legislation.[Footnote 3] In addition, House Report 110-197[Footnote 4]
directs GAO to assess UNRWA's compliance with conditions required by
law on U.S. contributions to UNRWA, particularly UNRWA's cash
assistance program. In response to previous mandates, we assessed
UNRWA's actions to implement section 301(c) of the Foreign Assistance
Act of 1961, as amended, in 2003[Footnote 5] and USAID's compliance in
2006.[Footnote 6] We made no recommendations in our 2003 report. USAID
implemented four recommendations from our 2006 report, which were
intended to strengthen USAID efforts to help ensure that U.S.
assistance to the West Bank and Gaza does not support terrorist
activities. For example, as we recommended, USAID clarified how its
antiterrorism policies and procedures would be applied to certain types
of assistance instruments.
In response to the appropriations act and the House report, as well as
a request from the House Foreign Affairs Committee and its Subcommittee
on the Middle East and South Asia, we (1) assessed the extent to which
USAID has complied with its policies and procedures to help ensure that
its programs do not provide support to entities or individuals
associated with terrorism in the West Bank and Gaza, and (2) assessed
State's and UNRWA's policies and procedures to support conformance with
U.S. statutory conditions placed on contributions provided to UNRWA to
prohibit funding of terrorist-related activities.
To address the first objective, we analyzed key documents and data
provided by USAID and interviewed USAID and prime awardee officials in
Jerusalem, Tel Aviv, and Washington, D.C. We also analyzed (1) all 32
new prime awards made by USAID in fiscal year 2008 using Economic
Support Funds and (2) a random sample of 144 out of 2,620 subaward
agreements that USAID identified for us as made by prime awardees in
fiscal year 2008. We assessed both prime awards and subawards against
the requirements stipulated by USAID to help ensure compliance with
U.S. legal requirements prohibiting support for terrorist-related
activities. To address the second objective, we analyzed key documents
and data provided by State and UNRWA; interviewed State officials in
Jerusalem and Washington, D.C.; interviewed UNRWA officials; and
observed UNRWA programs in Jordan and the West Bank.
We conducted this performance audit from August 2008 to May 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. (Appendix I provides a
detailed discussion of our objectives, scope, and methodology.)
Results in Brief:
We found that USAID strengthened its antiterrorism policies and
procedures and complied with them when making new prime awards, but had
weaknesses related to compliance at the subaward level. In response to
our 2006 recommendation, USAID strengthened its antiterrorism policies
and procedures by clarifying how each would apply to certain types of
assistance instruments and by strengthening its vetting process, which
involves investigating a person or entity for links to terrorism. Since
our 2006 report, USAID has also instituted new procedures to monitor
prime awardee compliance with antiterrorism requirements, which have
allowed it to identify and take some actions to address areas of
concern we found. For example, the agency has hired a compliance
specialist who reviews prime awardees' subaward files for compliance
with its antiterrorism policies. All 32 new prime awards made by USAID
in fiscal year 2008 included all applicable clauses. In addition, USAID
obtained the antiterrorism certifications, where applicable, and
conducted required vetting for all applicable new prime awards. We also
found that USAID vetted all the appropriate officials, when required,
for our sampled subawards. For our random sample of 144 fiscal year
2008 subawards, applicable antiterrorism certifications were obtained
and vetting was conducted. However, regarding mandatory clauses, we
estimated that insufficient evidence exists to assess compliance for
approximately 17 percent of the fiscal year 2008 subawards USAID
identified. For the estimated 83 percent of subawards with sufficient
evidence to assess compliance, we estimated that approximately 5
percent had weaknesses related to the inclusion of mandatory clauses
while the remaining 95 percent did not. We also found limitations in
how the agency monitors prime awardee compliance with requirements
related to the inclusion of mandatory clauses in subawards.
Since our 2003 report, State and UNRWA have strengthened policies and
procedures to conform with conditions on U.S. contributions to UNRWA,
but weaknesses remain. Section 301(c) of the Foreign Assistance Act of
1961, as amended, prohibits U.S. contributions to UNRWA except on the
condition that UNRWA take all possible measures to assure that no part
of the U.S. contribution shall be used to furnish assistance to, among
others, any refugee who has engaged in any act of terrorism. While
UNRWA has agreed to conform to conditions on U.S. contributions, State
has not established criteria to determine whether UNRWA's actions are
consistent with this agreement. For example, State has not defined the
key term "all possible measures" or defined what would constitute
nonconformance. Nevertheless, State has strengthened some policies and
procedures to oversee UNRWA's conformance with conditions on U.S.
contributions. UNRWA has also implemented and strengthened policies and
procedures to promote neutrality of its beneficiaries, staff,
contractors, and facilities that cover a broader range of conduct than
covered in section 301(c). UNRWA reported denying approximately 110
applications for discretionary cash assistance to refugees since July
2006, because the agency found the refugees' behavior was inconsistent
with UN neutrality or restrictions related to section 301(c). However,
we found limitations in some of UNRWA's efforts. For example, UNRWA
told us it has screened all staff, contractor, and beneficiary names
against a UN Security Council list of potential terrorists and found no
matches. However, the list is restricted to individuals and entities
affiliated with Al-Qaida and the Taliban and thus does not specifically
include major regional groups, such as Hamas and Hezbollah, which the
United States has designated as foreign terrorist organizations.
Finally, we found that internal audits of UNRWA do not assess whether
contracts contain required antiterrorism clauses or assess controls for
UNRWA's overall cash assistance program.
To strengthen compliance with USAID policies and procedures at the
subaward level, we recommend that the Administrator of USAID take
action to help ensure that prime awardees comply with USAID
requirements to include mandatory clauses in subawards. In addition, to
help ensure that assistance is not inadvertently provided to
terrorists, we recommend that the Secretary of State consider taking
additional steps to oversee UNRWA's conformance with U.S. conditions on
funding, such as (1) establishing criteria to evaluate UNRWA's efforts;
(2) screening the names of UNRWA contractors against lists of
individuals and entities of concern to the United States; and (3)
monitoring UNRWA's commitment that future internal audits would assess
UNRWA's compliance with its neutrality and antiterrorism policies for
contractors as well as internal controls for cash assistance.
USAID, State, and UNRWA provided written comments on a draft of this
report, which are reprinted in appendices IV, V, and VI. USAID, State,
and UNRWA outlined actions they intend to take to implement our
recommendations. USAID stated that our work contributed positively to
the continuous improvement and strengthening of USAID West Bank and
Gaza mission's compliance with antiterrorism policies and procedures.
However, USAID disagreed with our finding that insufficient evidence
was present to assess a significant percentage of fiscal year 2008
subawards. We maintain that evidence was insufficient because the only
references to the purchase orders that were included on the mandatory
clauses were individual handwritten annotations. It was not clear who
made the annotations and when those annotations were made. State is
undertaking actions to address all three parts of our recommendation,
but noted that it will need to address the resource implications of two
of these. State expressed some concern about the resources required to
undertake effective screening and noted that conducting additional
internal audits would result in additional costs to UNRWA. UNRWA made a
commitment that future internal UNRWA audits would assess the agency's
compliance with its neutrality and antiterrorism policies for
contractors and internal controls for cash assistance.
Background:
The U.S. government has provided assistance to Palestinians both
bilaterally and multilaterally for several decades. USAID is the agency
primarily responsible for implementing the bilateral aid program, while
State oversees annual contributions to international organizations,
primarily to UNRWA, for the multilateral program. The focus, size, and
intent of the bilateral and multilateral programs differ. Table 1
compares the main characteristics of the two programs.
Table 1: Key Features of USAID and UNRWA Programs for Assistance to
Palestinians:
Fiscal year 2008 U.S. funding;
USAID: $389.5 million appropriated in Economic Support Funds to provide
assistance to the West Bank and Gaza. This includes about $900,000 that
was obligated to the World Food Program to provide food for families in
Gaza;
UNRWA: State contributed about $185 million to UNRWA--nearly $171
million from the Migration and Refugee Assistance account and $14
million from the Emergency Refugee and Migration Assistance Fund.
Focus of program;
USAID:
Strengthens Palestinian institutions and invests in projects that
improve the health and welfare of the Palestinian people. Projects
include funds to:
* provide technical assistance to Palestinian health institutions;
* improve water infrastructure in the West Bank, and;
* provide immediate employment opportunities through the construction
of small-scale infrastructure;
Provided over $3.3 million in cash assistance to about 6,000
recipients, mainly for scholarships and tuition, in fiscal year 2008,
according to USAID estimates;
UNRWA: Directly provides social services and humanitarian support to
Palestinian refugees; UNRWA's 2008 program budget was allocated as
follows:
* 52 percent for education services;
* 19 percent for health;
* 13 percent for support services;
* 9 percent for relief and social services;
* 5 percent for infrastructure and camp improvement, and;
* 2 percent for microfinance and microenterprise;
UNRWA reported it spent $88.8 million for cash assistance to refugees
from January 2006 through December 2008--$36.2 million for cash
subsidies for food and selective cash assistance from its General Fund
and $52.6 million in emergency cash assistance from its Emergency
Appeal.
Program implementation;
USAID: Contractors and grantees implement programs;
UNRWA: UNRWA directly implements most programs and relies minimally on
contractors to provide supplies and equipment; The majority of UNRWA
staff are directly involved in providing services, for example, as
doctors, teachers, social workers or sanitation laborers. Staff costs
account for much of the agency's regular budget.
Location and size of organization;
USAID: USAID Mission to the West Bank and Gaza (the mission), located
in Tel Aviv, Israel, manages programs. According to USAID officials,
the mission is staffed by 137 individuals including Foreign Service
Nationals;
UNRWA: UNRWA headquarters are in Gaza and Amman, Jordan. UNRWA employs
nearly 30,000 staff. About 90 percent of these staff are locally-
recruited Palestinian refugees. UNRWA also employs 183 international
staff.
Location and funding of projects and services;
USAID: Mainly the West Bank; USAID used only a small percentage of
funds for assistance activities in Gaza;
UNRWA: UNRWA's 2008 to 2009 regular budget for operations was allocated
among field offices as follows:
* 31 percent in Gaza;
* 22 percent in Jordan;
* 17 percent in the West Bank;
* 13 percent in Lebanon;
* 9 percent in Syria;
* 8 percent in UNRWA headquarters, Amman and Gaza.
Source: GAO analysis of USAID and UNRWA documents and estimated funding
amounts for cash assistance.
Notes:
UNRWA has two primary sources of funding: (1) the General Fund, which
is funded through voluntary contributions to UNRWA's regular budget
annually, and (2) the Emergency Appeal, which is funded through an
appeal by UNRWA's Commissioner-General to donors for emergency funding
in response to a crisis in a particular UNRWA field area of operations.
The United States does not currently limit contributions to UNRWA's
General Fund to specific purposes. However, as of July 2007, State said
it placed limitations on all its contributions to UNRWA's Emergency
Appeal for West Bank and Gaza so that no U.S. funds are to be used for
UNRWA's emergency cash assistance activities in West Bank and Gaza.
According to the mission, none of the scholarship or tuition funds were
provided to the recipients. All assistance was provided directly to the
relevant school on their behalf.
[End of table]
To help ensure that U.S. funds for these programs are not provided to
individuals or entities engaged in terrorist activities, State and
USAID must comply with restrictions under U.S. law when providing funds
for Palestinian assistance programs. For the bilateral aid program,
section 657(b) of the Consolidated Appropriations Act of 2008 states
the following:
"Prior to the obligation of funds appropriated by this Act under the
heading 'Economic Support Fund' for assistance for the West Bank and
Gaza, the Secretary of State shall take all appropriate steps to ensure
that such 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 nor, with respect to
private entities or educational institutions, those that have as a
principal officer of the entity's governing board or governing board of
trustees any individual that has been determined to be involved in, or
advocating terrorist activity or determined to be a member of a
designated foreign terrorist organization. The Secretary of State
shall, as appropriate, establish procedures specifying the steps to be
taken in carrying out this subsection and shall terminate assistance to
any individual, entity, or educational institution which she has
determined to be involved in or advocating terrorist activity."
In addition, the act states:
"None of the funds appropriated under title II through V of this Act
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."
[Footnote 7]
The Secretary of State has deferred to USAID, the implementing agency,
to ensure compliance with these and similar provisions. The USAID
Mission to the West Bank and Gaza (the mission) developed Mission Order
21, which outlines USAID's procedures to help ensure that its
assistance program does not inadvertently provide support to entities
or individuals associated with terrorism, in accordance with U.S. law.
[Footnote 8] Mission Order 21 establishes, among others, the following
requirements:
* All solicitations and awards for contracts, grants, and subagreements
must contain the antiterrorism clause. This clause reminds award
recipients that they must comply with U.S. executive orders and laws
prohibiting transactions with terrorists, and the provision of
resources and support to individuals or organizations associated with
terrorism. UN agencies that receive USAID funds must include a separate
clause.
* All U.S. and non-U.S. organizations must sign the antiterrorism
certification before being awarded a grant or cooperative agreement to
certify that the organization does not provide material support or
resources for terrorism. This certification recommends that the
recipient follow certain steps to comply with its obligation, including
(1) screening against the U.S. Department of Treasury's Office of
Foreign Assets Control (OFAC) list[Footnote 9] and the UN Security
Council's Al-Qaida and Taliban Sanctions Committee Consolidated List
(UN 1267 list)[Footnote 10] before providing any material support or
resources to an individual or entity and (2) implementing reasonable
monitoring and oversight procedures to safeguard against assistance
being diverted to support terrorist activity.
* All contracts, subcontracts, grants, cooperative agreements, and
subgrants must contain the clause restricting facility names, known as
the naming clause. This clause states, among other things, that no
assistance shall be provided under this contract or agreement for any
school, community center or other facility that is named after any
person or group that has advocated, sponsored, or committed acts of
terrorism.
* Certain individuals and organizations need to be vetted, which
involves checking recipients' names and other identifying information
against databases and other information sources to determine if they
have links to terrorism.
For UNRWA, section 301(c) of the Foreign Assistance Act of 1961, as
amended, states the following:
"No contributions by the United States shall be made to the United
Nations Relief and Works Agency for Palestinian Refugees in the Near
East except on the condition that the United Nations Relief and Works
Agency takes all possible measures to assure that no part of the United
States contribution shall be used to furnish assistance to any refugee
who is receiving military training as a member of the so-called
Palestinian Liberation Army or any other guerrilla type organization or
who has engaged in any act of terrorism."[Footnote 11]
This clause is commonly referred to as "section 301(c)."
State is responsible for implementing section 301(c) and, in that
capacity, oversees U.S. contributions to UNRWA. UNRWA beneficiaries
include Palestinian refugees and a limited number of individuals
displaced by the 1967 Arab-Israel conflict. According to UNRWA, most of
the displaced individuals are in Jordan.
[Text box: UNRWA‘s Beneficiaries: UNRWA‘s beneficiaries include 4.6
million individuals who have registered with UNRWA for refugee status.
Under UNRWA's operational definition, Palestinian refugees are
individuals:
* whose normal place of residence was Palestine between June 1946 and
May 1948,
* who lost both their homes and means of livelihood as a result of the
1948 Arab-Israeli conflict, or,
* who are descendants through the male line of individuals who became
refugees in 1948. UNRWA also provides health and education services to
individuals displaced by the 1967 Arab-Israeli conflict. End of text
box]
USAID Strengthened Its Antiterrorism Policies and Procedures and
Complied with Them in Making New Prime Awards, but Has Weaknesses in
Compliance at the Subaward Level:
Since 2006, USAID has strengthened its antiterrorism policies and
procedures to help ensure that assistance is not inadvertently provided
to terrorists. USAID complied with its strengthened policies and
procedures when issuing new prime awards in fiscal year 2008. Although
USAID's new monthly reporting system was intended, in part, to improve
compliance at the subaward level, we found that it did not provide
sufficient information for us to assess compliance.
USAID Strengthened Its Antiterrorism Policies and Procedures:
USAID Strengthened Its Antiterrorism Policies and Procedures by
Clarifying How They Apply to Each Assistance Agreement:
In response to our 2006 recommendation, USAID strengthened its
antiterrorism policies and procedures--as outlined in Mission Order 21-
-to help ensure that assistance is not inadvertently provided to
terrorists by clarifying how those policies and procedures would be
applied to each type of assistance instrument. Although USAID had
established antiterrorism provisions that apply to contracts,
cooperative agreements, and grants, we reported in 2006 that it had not
clearly articulated how antiterrorism provisions apply to other types
of assistance instruments, such as purchase orders.[Footnote 12] We
recommended that USAID develop policies and procedures to address how
each of its antiterrorism provisions apply to other types of assistance
instruments. In its October 3, 2007, revision to Mission Order 21,
USAID strengthened its antiterrorism policies and procedures by listing
which clauses and certifications would apply to each type of assistance
instrument--thereby responding to our 2006 recommendation. For example,
the antiterrorism certification now clearly applies to grants made
under contracts. In addition, USAID clarified that instruments that can
function as contracts, such as purchase orders, are subject to the same
policies as contracts.
USAID Strengthened Its Vetting Process:
USAID strengthened its vetting process in response to a 2006 GAO
recommendation that the mission's vetting management database promote
data reliability, satisfy technical documentation requirements, and
meet all applicable security requirements. This recommendation was
based on our finding that the mission did not routinely collect or
verify detailed identifying information--such as date and place of
birth--needed to fully vet individuals. We also identified weaknesses
in the mission's unclassified database, which was designed to record
and track vetting results. For example, few safeguards were in place to
control access to the information stored in the database. In response
to our recommendation and findings, the following were completed:
* In December 2006, USAID instituted a new strengthened vetting system,
called the Partner Vetting System. This system uses U.S. law
enforcement and intelligence databases to vet the names of individuals
that it receives from the mission. It also requires additional
information for individuals being screened, such as the individual's
government-issued photo identification number and type (e.g., passport
and passport number). Access to the system is limited to certain
individuals who may have different levels of access to information in
the system. For example, the clerks who enter vetting information do
not have the same level of access as the contracting officer who makes
the award.
* USAID placed a U.S. citizen with a security clearance in charge of
the office responsible for maintaining the vetting system, thereby
enabling sensitive derogatory information on potential awardees to be
shared with the mission. Derogatory information indicates that vetted
organizations or individuals appear to have links with terrorism.
* USAID conducted additional vetting at the U.S. consulate in Jerusalem
for organizations receiving cash or in-kind assistance, which serves as
another review to help ensure that funds are not inadvertently given to
terrorists.
According to USAID officials and prime awardees we spoke with, these
improvements have strengthened controls over the system and decreased
vetting time from about 9 months to as little as 1 to 2 weeks.
USAID Enhanced Monitoring Efforts to Provide More Timely Information on
Compliance:
In 2008, USAID enhanced its efforts to monitor prime awardee compliance
with applicable Mission Order 21 requirements by commissioning an
additional compliance audit, hiring a compliance specialist to conduct
recurring compliance reviews, and requiring that prime awardees address
noncompliance findings. USAID commissioned an additional compliance
audit by contracting with an independent auditing firm to review 15
prime awardees' compliance with Mission Order 21 during the period from
June 1, 2006, through January 31, 2008. The audits examined 1,094
subawards and found 70 total weaknesses; 62 awards contained at least 1
weakness and 5 of those awards contained multiple weaknesses. Thirty-
eight of the 70 weaknesses were related to mandatory clauses, 13 were
related to vetting approval, and 4 were related to vetting procedures.
The audit also found 15 monthly reporting weaknesses. According to
USAID officials, where appropriate, prime awardees took actions to
address the identified weaknesses. They also said that, in response to
these findings, mandatory clauses were inserted into subawards when
necessary, and required vetting was conducted and each subawardee
passed vetting. This one-time audit provided additional feedback to
USAID on the 15 prime awardees' compliance beyond the existing feedback
provided through the annual Regional Inspector General audits.[Footnote
13]
Building on the one-time additional compliance audit, USAID further
enhanced its oversight of prime awardees' efforts to comply with their
Mission Order 21-related requirements by hiring, in 2008, a compliance
specialist. This specialist is responsible for conducting recurring
compliance reviews of prime awardees' subaward activities. Previously,
USAID only examined prime awardee compliance with these requirements as
part of periodic contract and compliance audits conducted under the
direction of the Regional Inspector General. According to USAID
officials, the compliance specialist's reviews allow USAID to monitor
compliance on a more timely basis than can be done with the annual
USAID Regional Inspector General audits. In July 2008 the compliance
specialist began conducting periodic site visits to prime awardee
locations to review records related to the subawards made under USAID
contracts and assistance agreements to determine whether they complied
with Mission Order 21. According to the mission, the compliance
specialist's review includes inspecting documents related to each
subaward contract or agreement to confirm that (1) the prime awardee
had received evidence from USAID that required preaward vetting had
occurred and the subawardee was eligible; (2) each subaward contract or
agreement had related mandatory clauses; and (3) where applicable, the
prime awardee had obtained from subawardees a signed and dated
antiterrorism certification prior to making the subaward. In addition,
the mission stated that, whenever possible, the compliance specialist
reviews the prime awardees' records of subaward activity to determine
whether all required subawards were included in the monthly subaward
reports. The compliance specialist uses a standardized checklist to
determine whether an award is compliant with Mission Order 21.
The compliance specialist found problems with some prime awardees'
compliance with Mission Order 21 and their monthly reports, most of
which, according to the mission, have been resolved. In his first draft
summary report, the compliance specialist reviewed 2,883 subawards
issued by 32 prime awardees for compliance with Mission Order 21. The
specialist discovered 26 instances where the subaward did not include
the naming clause, 13 where the subaward did not include the
antiterrorism clause, and 2 where the antiterrorism certification was
not signed prior to the award being made. The compliance specialist
also found 5 instances of noncompliance with Mission Order 21's vetting
policies. In one of those instances, for example, USAID disallowed the
costs submitted by the prime awardee because the prime awardee issued
the subaward without obtaining vetting approval. The mission said the
subawardees were subsequently vetted and cleared in the remaining four
cases. According to the mission, awardees have since resolved most
instances of noncompliance found by the reviewer. The remaining
instances were not corrected because the award had already expired or
had been canceled by the prime awardee. Additionally, the compliance
specialist found 66 instances where prime awardees had not correctly
reported their subawards in their monthly reports to USAID.
USAID Complied with Its Strengthened Antiterrorism Policies and
Procedures at the Prime Award Level:
USAID Included All Applicable Clauses in All New Prime Awards Made in
Fiscal Year 2008 and Obtained Required Certifications:
We found that all 32 new prime awards made by USAID in fiscal year 2008
contained the appropriate mandatory clauses--the antiterrorism and
naming clauses--and, where applicable, USAID had obtained the advanced
antiterrorism certifications,[Footnote 14] as required under Mission
Order 21. The antiterrorism clause reminds award recipients that they
must comply with U.S. executive orders and laws prohibiting
transactions with terrorists and the provision of resources and support
to individuals or organizations associated with terrorism. The naming
clause states that no assistance shall be provided under this contract
or agreement for any school, community center, or other facility that
is named after any person or group that has advocated, sponsored, or
committed acts of terrorism.[Footnote 15] USAID officials said there
are relatively few situations where the United States is providing
assistance to the West Bank and Gaza that involves naming buildings or
structures. The antiterrorism certification requires that all U.S. and
non-U.S. organizations must certify, before being awarded a grant or
cooperative agreement, that the organization does not provide material
support or resources for terrorism.
[Text box: Mission Order 21 requires the USAID Mission to vet the
following:
* All prime awardee and subawardee non-U.S. organizations or
individuals (16 years old or older) proposed for a contract or
subcontract above $25,000.
* All prime awardee and subawardee non-U.S. organizations or
individuals (16 years old or older) proposed to receive cash or in-kind
assistance under a cooperative agreement, grant, or subgrant.
* All non-U.S. individuals (16 years old or older) who receive USAID-
financed training, study tours or invitational travel in the United
States or third countries or who receive training in the West Bank/Gaza
lasting more than 5 consecutive work days.
* All entities or specifically identified persons (16 years old or
older) who directly receive other forms of cash or in-kind assistance,
with the following exceptions (these thresholds apply to a single award
and are not cumulative):
- individuals who receive jobs under employment generation activities,
- individuals who receive assistance of $1,000 or less,
- organizations that receive assistance of $2,500 or less,
- households that receive micro-enterprise loans or assistance of
$5,000 or less, and,
- vendors of goods or services acquired by USAID contractors and
grantees in the ordinary course of business for their own use.
Even if vetting would not otherwise berequired under these rules,
vetting will be conducted whenever there is reason to believe that the
beneficiary of assistance or the vendor of goods or services commits,
attempts to commit, advocates, facilitates, or participates in
terrorist acts, or has done so in the past. End of text box]
USAID Vetted All Applicable New Prime Awards Made in Fiscal Year 2008:
USAID vetted the appropriate officials for all four new prime awards
made in fiscal year 2008 that required vetting according to Mission
Order 21.[Footnote 16] In addition, USAID officials said they vetted,
in fiscal year 2008, 1,239 individuals in compliance with Mission Order
21 before they received USAID assistance for scholarships,
microenterprise loans, and direct cash assistance.
In establishing requirements for whom to vet, a USAID official said the
mission has weighed the costs of vetting, the risks of not vetting, and
the need to meet its foreign assistance goals. According to this
official, the mission does not vet U.S. organizations or citizens who
receive assistance due to U.S. privacy law concerns. In addition, U.S.
organizations and citizens are subject to U.S. criminal statutes. This
USAID official said that they set certain criteria and dollar
thresholds that govern whether or not vetting is required. For example,
USAID only conducts vetting at the prime and subaward levels and only
vets key individuals associated with the applicable non-U.S.
organization. As a result, employees of non-U.S. organizations who are
not key individuals are not vetted. USAID also does not vet non-U.S.
organizations and individuals that receive contracts unless the
cumulative value of the contracts received in a 12-month period exceeds
$25,000. (See appendix II for additional information on the vetting
process.)
USAID's New Monthly Subaward Reporting System Did Not Provide
Sufficient Information for Us to Assess Compliance:
USAID Instituted a New Monthly Subaward Reporting System:
USAID instituted a new monthly reporting system in response to a prior
GAO recommendation. In 2006, GAO recommended that USAID develop a
review and reporting system to help ensure prime awardees comply with
the requirements related to subaward vetting, certifications, and
mandatory clauses. In response, USAID instituted, as part of its plan
to assess compliance, a monthly reporting requirement under which prime
awardees (1) submit information on new subawards they have made
(including the subawardee name and subaward type and value) and copies
of required mandatory clauses and antiterrorism certifications, and (2)
indicate whether the required subaward vetting took place prior to the
award. The prime awardees are to send the mission a spreadsheet listing
the required information for each subaward, as well as copies of the
related supporting documentation. The USAID clerk who receives the
information inputs the amount of each program-related subaward into the
Partner Vetting System (PVS). This allows the mission to track the
cumulative amount of contracts awarded to any single awardee to ensure
that vetting occurs when required.
Subawards Met Vetting Requirements and Subawardees Provided Required
Antiterrorism Certifications:
For each of the 51 subawards from our random sample of 95 subawards
made to non-U.S. organizations and individuals that required preaward
vetting, the PVS showed that USAID vetted and approved each subawardee
prior to the date of the subaward.[Footnote 17] In addition, for each
of the 35 subawards below the $25,000 threshold the PVS included the
subawardee's name and the amount of the subaward. This information
supports the Mission Order 21 requirement to vet a subawardee when the
cumulative amount given to that subawardee exceeds $25,000. We also
found that prime awardees obtained the signed antiterrorism
certification for all six subawards that required this certification.
[Footnote 18] As required, each certification was dated prior to the
subaward date.
Insufficient Evidence to Assess Subaward Compliance with Requirements
Related to Mandatory Clauses:
Based on our random stratified sample, we estimate that 17 percent,
plus or minus 7 percentage points, of all fiscal year 2008 subawards
identified by USAID did not contain sufficient evidence to determine
whether the mandatory clauses were included in the subaward at the time
the subaward was made.[Footnote 19] In conducting our review, we found
that the reported information, including the subaward information and
related documentation reported monthly to USAID by prime awardees, did
not include sufficient evidence to enable us to reasonably conclude
whether or not the prime awardee had met the requirement to include the
mandatory clauses in the subaward at the time the subaward was made.
The monthly reported information was often insufficient because prime
awardees are only required by USAID to provide copies of the mandatory
clauses and are not required to include within the mandatory clauses
specific references to the subaward, such as the subaward number and
date, or to have the subawardee sign and date the clauses. In many
instances, the copies of the mandatory clauses provided by prime
awardees did not contain information identifying the applicable
subaward or otherwise clearly show that the clauses were included in
the subawards at the time they were made. Therefore, we asked USAID to
provide us with copies of the complete subaward documents for each of
our 144 randomly selected subawards. However, even with the copies of
actual subaward documents provided by USAID, we could not determine
whether the mandatory clauses were included at the time the subaward
was made for many of the subawards in our sample.
We based our estimate that approximately 17 percent of all fiscal year
2008 subawards USAID had identified did not contain sufficient evidence
to assess compliance on 40 subawards from our random sample. All 40
involved purchase orders issued by 1 prime awardee. For each of the 40
subawards, we found that the information USAID provided was not
sufficient to assess compliance because the purchase order documents
did not contain the mandatory clauses or include a specific reference
to them even though the October 2007 revisions to Mission Order 21
required that the mandatory clauses be included in each contract or
grant agreement, including purchase orders. The information provided by
USAID consisted of a discrete purchase order and separate additional
pages containing the mandatory clauses. However, the only references to
the purchase orders that were included on the copies of the mandatory
clauses were individual handwritten annotations. It was not clear who
made the annotations and when they were made. USAID officials said they
believe the subaward information they provided was sufficient to
determine compliance because the prime awardee provided USAID with
copies of the separate purchase order and mandatory clauses attached
together. However, we found several instances in which copies of the
same mandatory clauses were provided to us as support for different
purchase orders in our subaward sample even though these clauses were
signed and dated with dates that were not consistent with the dates of
the individual subawards.[Footnote 20] As a result, we could not
reasonably conclude whether or not the prime awardee complied with the
requirement to include the mandatory clauses as part of the 40
subawards at the time they were made. To clearly establish at the time
of the subaward that subawardees agreed to the mandatory clauses when
the mandatory clauses are not included within a subaward, we believe
that:
* each applicable contract (including purchase orders) or agreement
should include a direct and specific reference to the existence and
applicability of the separate mandatory clauses, and:
* each set of related but separate mandatory clauses should include
within the clauses specific and direct reference to the contract
(including purchase orders) or agreement.
Some Prime Awardees Did Not Comply with Mandatory Clause Requirements
when They Made Subawards:
Based on our random stratified sample, we estimate that about 83
percent, plus or minus 7 percentage points, of all fiscal year 2008
USAID-identified subawards contain sufficient evidence to assess
compliance.[Footnote 21] There were 104 subawards in our random sample
for which we obtained sufficient documentation to determine whether the
prime awardees complied with requirements related to mandatory clauses.
We concluded, based on this documentation, that some prime awardees did
not always comply with requirements by including mandatory clauses in
subaward files at the time they made the subaward. We estimate that for
95 percent, plus or minus 4 percentage points, of those subawards with
sufficient information to assess compliance, prime awardees included
the mandatory clauses at the time the subaward was made, and, thus were
in compliance with Mission Order 21. However, based on the evidence
provided to us, we estimate that for 5 percent, plus or minus 4
percentage points, of subawards with sufficient information to assess
compliance, the prime awardee did not include the mandatory clauses at
the time the subawards were made.
For 14 of the 104 sampled subawards with sufficient information, the
evidence provided by USAID established that the prime awardee did not
include the required mandatory clauses in each applicable subaward at
the time the subaward was made. For 2 of the 14 subawards, the prime
awardees later modified the subaward to incorporate the mandatory
clauses. For another 8 of the 14 subawards, the prime awardee
subsequently obtained the subawardee's acknowledgement that the
mandatory clauses were applicable to the subaward by having the
subawardee sign and date the mandatory clauses. For 3 other subawards,
while the prime awardee made some efforts to incorporate the required
mandatory clauses, the required clauses were not included in each
applicable subaward prior to the completion of work. For the remaining
subaward, the subaward was already completed when the prime awardee
noted that the subaward did not include the required mandatory clauses.
State and UNRWA Have Strengthened Policies and Procedures to Determine
Whether UNRWA's Actions Are Consistent with Its Agreement to Conform
with Conditions for Receiving U.S. Funds, but Weaknesses Remain:
UNRWA has agreed with State to take steps to conform with the condition
on U.S. contributions set forth in section 301(c) of the Foreign
Assistance Act of 1961, as amended, and report to State on its efforts
semiannually. However, State has not established criteria to determine
whether UNRWA is in conformance with conditions on U.S. funds, though
it has strengthened some oversight procedures. UNRWA has strengthened
policies and procedures intended to conform with the conditions on U.S.
contributions, but we found some weaknesses in UNRWA's efforts, such as
screening only against a UN terrorist list, in accordance with UN
policy, and in internal audits of UNRWA operations.
UNRWA Has Agreed to Conform with Conditions on U.S. Contributions
through Agreements with State:
Since late 2006, UNRWA and State have signed 3 annual Frameworks for
Cooperation and more than 10 letters confirming UNRWA's commitment to
conform with the condition on U.S. contributions provided in section
301(c) prior to receiving U.S. funds. In accepting U.S. government
funding, UNRWA certifies that it is taking all possible measures to
ensure that no part of the United States contribution is being used to
furnish assistance to, among others, any refugee who has engaged in any
act of terrorism. Under the Framework for Cooperation, which is renewed
annually and signed by both State and UNRWA, UNRWA commits to, among
other things, (1) conform with the condition in section 301(c) and (2)
report every 6 months on actions it has taken to ensure conformance
with the condition in section 301(c). UNRWA agrees to similar terms and
conditions in U.S. contribution letters before receiving U.S. funds.
Since October 2006, UNRWA has submitted five semiannual reports to
State, which describe the agency's actions to enforce rules and
regulations on staff and beneficiary behavior; monitor UNRWA facilities
in the West Bank and Gaza; and screen names of individuals and entities
who receive UNRWA funding against a UN terrorist list.
According to UNRWA officials, the policies and procedures UNRWA
established to implement the UN principles of neutrality and
impartiality and the goals of the International Convention for the
Suppression of the Financing of Terrorism support UNRWA's conformance
with U.S. conditions. State officials also told us they agreed that
UNRWA's efforts to ensure neutrality are consistent with and support
UNRWA's efforts to meet the condition for receiving U.S. contributions
under section 301(c). Under the UN principles of neutrality and
impartiality, UNRWA staff and other personnel should neither seek nor
accept instructions from any government or other authority external to
UNRWA. This ensures that staff and other personnel are not involved in
conduct that is inconsistent with the independence and impartiality
required by their status as international civil servants or service
providers to the UN. UNRWA officials said UN neutrality is compatible
with section 301(c) funding conditions. According to UNRWA, a staff
member's involvement in a militant group or terrorist activities would
be clearly contrary to UNRWA's staff regulations and rules and would
certainly result in termination. In requiring that staff, third
parties, and facilities be neutral, UNRWA proscribes a range of conduct
broader than the conduct described in section 301(c). According to
UNRWA rules, staff member involvement in activities such as running for
political office in an election or making public political statements
would result in disciplinary action, including termination. Although
UNRWA does not require beneficiaries to be politically neutral to
receive assistance, the agency promotes neutrality within the refugee
camps and refuses assistance to refugees involved in inappropriate
behavior, including section 301(c)-related activities. UNRWA defines
terrorism according to the 1999 International Convention for the
Suppression of Financing of Terrorism.[Footnote 22]
State Has Not Established Criteria to Determine UNRWA's Conformance
with Conditions on U.S. Funds but Has Strengthened Some Oversight
Procedures:
State Has Not Established Criteria to Determine UNRWA's Conformance
with Conditions on U.S. Funds:
State reported that it has contributed nearly $340 million to UNRWA in
the last 2 fiscal years, but State has not established written criteria
to determine whether UNRWA's efforts are consistent with the section
301(c) conditions that UNRWA has agreed to for receiving U.S. funds.
Aside from the assessments by State of whether to continue funding
UNRWA,[Footnote 23] State officials said that they have not developed
any written criteria to analyze UNRWA's semiannual reports and have not
assessed UNRWA's efforts against such criteria to determine
conformance. For example, State has not defined what would constitute
nonconformance or developed written definitions of key terms, including
"all possible measures"--a concern we also raised in 2003[Footnote 24]-
-that would help serve as criteria for analyzing UNRWA's semiannual
reports. In addition, we found that State did not have several
important UNRWA policy documents, which officials could use to help
form criteria for their evaluation of UNRWA's conformance, such as
UNRWA instructions for providing relief and social services (including
cash assistance) to refugees and the agency's assessment of high-risk
areas.
State officials said they consider UNRWA to be in conformance with its
commitment to adhere to section 301(c) based on State's ongoing review
of UNRWA's activities and reports through written communications and
discussions with UNRWA officials. State officials told us that, to be
consistent with section 301(c), they must affirm that State has an
internal level of confidence that UNRWA has taken all possible measures
to ensure that terrorists are not receiving assistance, such as having
procedures in place and taking measures to respond to issues that
arise. State officials said that they undertake immediate reviews of
any information or allegations of possible concern. State officials
told us that their reviews consist of an evaluation of information
received from UNRWA and other sources about the allegations or
questions arising from a review of the semiannual reports. State
officials also note that they regularly follow up, when necessary, on
what investigations and disciplinary actions UNRWA undertakes. For
example, when an allegation arose that UNRWA had employed a member of
Islamic Jihad, State contacted UNRWA to determine how UNRWA handled the
allegation. According to State, UNRWA reported that its investigation
into the matter resulted in the termination of the employee's direct
supervisors.
State Has Strengthened Some Policies and Procedures to Oversee UNRWA's
Conformance with U.S. Conditions:
Despite the absence of a written evaluation by State of UNRWA's
conformance with U.S. conditions, we found that State has strengthened
some policies and procedures to oversee UNRWA's conformance with
conditions on U.S. funds. In 2003, we reported that State had not
defined "terrorism" for the purpose of implementing section 301(c),
[Footnote 25] but State has since concurred with UNRWA in its use of
the definition of terrorism contained in the International Convention
for the Suppression of the Financing of Terrorism. In addition, State
reported that since we began our review it has introduced several new
policies and procedures to improve oversight by enhancing communication
with UNRWA on section 301(c). For example, State officials revised the
job description of the Regional Refugee Coordinator responsible for
UNRWA to specifically include additional roles and responsibilities for
monitoring and reporting on section 301(c) conformance. Also, since we
began our review, State has developed additional formal communication
procedures to communicate with UNRWA on section 301(c) issues.
Specifically, State has introduced the following procedures:
* Monthly senior-level conversations between State's Bureau of
Population, Refugees and Migration (PRM) and UNRWA on section 301(c)
and other priority issues. State told us that senior State officials
began meeting with UNRWA in October 2008 to specifically discuss
section 301(c)-related issues, including a recent meeting with the
Director of UNRWA's Gaza field office.
* Bimonthly meetings between the Regional Refugee Coordinator and the
U.S.-funded Operation Support Officers (OSO) for the West Bank and Gaza
who inspect UNRWA facilities, as well as other relevant officials, to
discuss section 301(c) issues.
* Meetings between PRM Washington, D.C., staff and West Bank and Gaza
OSOs to discuss section 301(c) issues during monitoring visits to the
region. State officials reported that the Regional Refugee Coordinator
and senior State officials from headquarters have met with West Bank
and Gaza OSOs six times from November 2008 to April 2009.
* An exchange of letters between State and UNRWA when incidents that
are potentially related to section 301(c) occur. State recently
communicated with UNRWA in a formal letter regarding issues in its most
recent semiannual compliance report.
In response to a suggestion we made during our review, State is
currently assessing the technical feasibility and resources involved in
identifying UNRWA contractors and funding recipients that may be on the
U.S. Department of Treasury's Office of Foreign Assets Control (OFAC)
list of individuals and entities subject to U.S. sanctions, as well as
consulting internally in order to determine whether and how it would
undertake such an effort. We discussed with State the feasibility of
screening the names of UNRWA contractors and funding recipients against
the OFAC list to determine whether UNRWA funds are going to individuals
and entities of concern to the United States. As we noted earlier,
USAID recommends that all U.S. and non-U.S. organizations that sign the
antiterrorism certification consider following steps that include
screening names against the OFAC list before providing any material
support or resources to an individual or entity. UNRWA declined a past
request by State to screen names against the OFAC list on the grounds
that doing so contradicts UN policy.[Footnote 26] When we compared a
list of about 15,000 contractors UNRWA paid between 2002 and 2009 to
the OFAC list, we found no perfect matches but did find a few possible
matches.[Footnote 27] One of these possible matches was a
telecommunications contractor UNRWA paid between 2002 and March 2009,
which OFAC placed on its list in July 2008 for reasons related to
allegations of corruption. State officials said they would need to
discuss with UNRWA what the agency would do with any information
regarding such possible matches, given the UN's practice of using a UN
terrorist list rather than lists provided by individual UN member
governments. UNRWA officials told us that if they are notified of
potential matches, they would use the information as a trigger to
conduct their own investigation into the matter in accordance with
their existing procedures. According to UNRWA officials, this is in
keeping with UNRWA's practice, which is to take seriously and pursue
any credible information it receives regarding the possible violation
of UN neutrality and impartiality principles.
UNRWA Has Strengthened Policies and Procedures Intended to Conform with
U.S. Conditions on Contributions, but Limitations Exist:
UNRWA Reported Denying Refugees Benefits, Including Cash Assistance,
Due to Inappropriate Conduct:
UNRWA reported denying approximately 110 applications for discretionary
cash assistance to refugees since July 2006 because agency
investigations found the refugees' behavior was inconsistent with UN
neutrality or restrictions related to section 301(c).[Footnote 28] For
example, UNRWA reportedly refused burial, rehousing, and other cash
assistance to refugees following its investigations into the death of
beneficiaries or their spouses as a result of Israeli military
incursions and operations, including targeted killings, home
demolitions, or workshop damage from shelling by Israeli military
authorities. According to UNRWA officials, such incidents are triggers
for an UNRWA investigation to determine whether individuals were
involved in inappropriate behavior and the potential denial of
benefits. In addition, UNRWA reported that it has denied cash
assistance for burial expenses to families of beneficiaries it found
were killed by an explosion while allegedly preparing an explosive
device, as well as refused cash assistance for post-surgery social care
to an individual involved in such an explosion. In more than 100 other
cases, UNRWA reported that it refused cash assistance to individuals
whose homes were demolished or for burial of family members killed in
the Israeli operations. The agency reported that it conducted field
investigations following these Israeli operations, but could not find
clear evidence that the individuals concerned had engaged in an act of
terrorism or other inappropriate behavior. However, the agency reported
that it denied assistance in these cases based on other reasons it
identified in its investigations, including failure to meet some
eligibility criteria, competing priorities, or insufficient resources.
UNRWA officials reported that it applies policies and procedures on
assistance to refugees that further the agency's conformance with
section 301(c) conditions. However, they also said that UNRWA provides
assistance in the context of its humanitarian mandate, meaning that
agency policy is generally not to deny education or primary healthcare
benefits. For example, UNRWA officials told us that the child of a
refugee who was denied benefits because of section 301(c)-related
behavior would not be disqualified from attending an UNRWA school.
Similarly, the family of such an individual would remain eligible for
medical services at an UNRWA health clinic. In some exceptional cases,
officials stated that UNRWA would not provide education benefits to a
refugee. For example, UNRWA told us the agency would deny vocational
training benefits to a young adult UNRWA found to be involved in
inappropriate behavior.
UNRWA Reported Disciplining and Terminating Staff Due to Behavior
Inconsistent with Agency Policies:
UNRWA reported investigating more than 30 cases since October 2006
relating to staff activities that were political or otherwise
inconsistent with UN neutrality and taking disciplinary action,
including termination, against 7 UNRWA staff as a result of these
investigations. UNRWA also reported that four terminated staff members
filed appeals with the Joint Appeals Board, of which UNRWA's
Commissioner-General dismissed two and two remain ongoing. For example,
in the last two years, UNRWA reportedly terminated a staff member's
employment immediately upon his release from Israeli detention for
conspiring to kidnap an Israeli security officer. UNRWA also reported
that it terminated staff members for political activity found to be
inconsistent with the independence and impartiality expected of UNRWA
staff.[Footnote 29] UNRWA officials also indicated that they denied
benefits to the families of staff members who were found, through
investigations, to have been involved in inappropriate behavior. For
example, after the agency conducted an investigation into the matter,
UNRWA reportedly denied benefits, including pension benefits, to the
family of a staff member who was identified by Israeli authorities as a
militant and was killed by an Israeli military strike. UNRWA reported
that it also terminated two other staff members for management failures
in this case.
UNRWA has implemented several policies to promote staff behavior that
supports UN neutrality. For example, the UNRWA Organizational
Development plan introduced additional training to improve staff
knowledge on UN privileges and immunities and legal capacity in all
field offices.[Footnote 30] The agency also reported that it performs
reference checks and background security clearances for job applicants
and has established procedures to investigate inappropriate staff
behavior. UNRWA also told us that it seeks information from authorities
whenever staff are detained, convicted, or refused a permit or targeted
by Israeli military forces. UNRWA officials said they share the names
of all UNRWA staff annually with the governments of Egypt, Israel,
Jordan, Lebanon, Syria, and the Palestinian Authority but have received
no information on staff members from these governments. Additionally,
once hired, UNRWA international staff must apply for visas from the
Governments of Egypt, Israel, Jordan, Lebanon, and Syria to work in
those areas. UNRWA officials told us that these processes provide
regional governments, notably in Egypt, Israel, Jordan, Lebanon, and
Syria, with additional opportunities to scrutinize the profiles of
UNRWA staff. Additionally, local staff in the West Bank and Gaza must
apply for permits from the Government of Israel for transit between
certain areas. For additional information on these policies and
procedures, see appendix III.
While UNRWA Reported Monitoring Facilities and Finding No Material
Misuse, It Continues to Face Recurring Incursions into Facilities:
Operation Support Officers (OSO) reported no instances in which agency
facilities were not being used as intended, but UNRWA continues to face
recurring incursions into its facilities.[Footnote 31] OSOs are to
formally inspect each UNRWA facility in the West Bank and Gaza every 3
to 4 months--and informally inspect the facilities during camp visits
as often as possible--to ensure that UNRWA facilities are used only to
provide UNRWA aid and services, follow up on the condition of the
facilities, and report on and immediately address any issues that are
identified. OSOs are also responsible for removing political posters
and communicating the importance of UNRWA's neutrality to the community
during camp visits. Since July 2006 UNRWA has reported more than 150
incursions into, and other violations of the immunity of, UNRWA
facilities by armed Israeli military or police forces, Palestinian
security forces, Palestinian militants or individual Palestinians. For
example, Israeli forces reportedly used UNRWA school and health
facilities as shooting positions or for interrogations, and Palestinian
Authority security forces have also reportedly entered UNRWA
facilities. In addition, UNRWA reported that armed Palestinian
militants have forcibly entered or fired weapons at, near, or from
UNRWA schools. Individual Palestinian beneficiaries who were angered by
a reduction in UNRWA programming have also taken action against UNRWA
facilities. UNRWA regularly protests these types of incursions as
violations of its privileges and immunities under international law,
and has asked the Palestinian Authority for increased police protection
in cases involving Palestinian militants.
UNRWA has introduced formal OSO inspection goals for the Gaza area of
three inspections per installation per year, which were absent in prior
years, but UNRWA officials reported that the security situation and
problems accessing the areas has increased the difficulty of meeting
these goals. UNRWA reported that OSOs conducted nearly 1,100 formal
inspections of its facilities in the West Bank and Gaza in 2008,
meeting approximately 95 percent of its goal. In the West Bank, OSOs
formally inspected each facility approximately 3.6 times (916 total
inspections) in 2008, narrowly missing a goal of 4 inspections per
installation (1024 total inspections). In Gaza, OSOs conducted 172
formal inspections in 2008. However, this represents less than one
inspection per installation in the Gaza area.
UNRWA currently does not have an OSO program in Jordan, Lebanon, or
Syria, but according to UNRWA officials, the agency hopes to receive
funding that will enable it to expand the OSO program to Lebanon. In
May, UNRWA selected a new protection officer funded by the European
Commission to integrate the refugees' protection into UNRWA operations
in Lebanon, including monitoring and reporting to senior staff on
protection-related issues. State has reported that it approved funding
in April 2009 for an expansion of the OSO program to Lebanon. We found
that facility inspections under the OSO program may address conditions
that could undermine UNRWA's neutrality. For example, during our visit
to an UNRWA school in Jordan, where UNRWA does not currently operate an
OSO program, we saw political graffiti on an exterior wall and posters
created by teachers to support the school's human rights curriculum
that had some violent content. Since our visit, UNRWA officials
reported that the Jordan field office has called upon senior field
officials to inspect facilities and that West Bank OSOs have shared
practices with these officials to improve their ability to perform
functions similar to the OSOs.
UNRWA Reported Expanding Screening with a UN Security Council List and
Finding No Matches, but the Screening Process Has Limitations:
UNRWA told us that it has expanded its use of a UN Security Council
terrorist list to now screen all recipients of agency funds and that
none of its staff, contractors, beneficiaries, or microfinance clients
have appeared on the list, but we found some limitations in the
agency's screening process. UNRWA screens its staff and contractors
every 6 months against the UN 1267 list. In addition, for the first
time, UNRWA screened all 4.6 million Palestinian refugees and
microfinance clients against this list in December 2008. UNRWA
officials told us that in addition to its screening and investigations
of individual applicants prior to providing assistance, the agency
intends to make such UN 1267 screening of all registered refugees and
microfinance clients a routine procedure. The agency also enhanced
transparency by introducing, in February 2009, a policy to disclose on
its Web site details of UNRWA contracts valued over $100,000, which
includes contractor names it screens against the UN 1267 list. However,
the list is limited to those individuals or entities affiliated with Al-
Qaida and the Taliban and thus does not specifically include major
regional groups, such as Hamas and Hezbollah, which the United States
has designated as foreign terrorist organizations.[Footnote 32]
According to UNRWA, the UN Security Council has various working groups
for terrorism-related issues, but the Sanctions Committee's UN 1267
list is currently the only such UN terrorist screening list available.
[Footnote 33] In addition, UNRWA does not conduct pre-employment
screening of staff. UNRWA stated that screening every 6 months ensures
that staff are screened during employment probationary periods.
Furthermore, UNRWA told us it is unable to screen all persons displaced
by the 1967 conflict who are receiving health and education benefits
because the agency does not register or collect information on such
displaced persons in the region.
Internal Audits of UNRWA Do Not Assess Antiterrorism Controls or the
Overall Cash Assistance Program:
UNRWA internal audits of its operations do not explicitly assess
antiterrorism controls or controls for UNRWA's overall cash assistance
program. UNRWA reported recent efforts to expand the capacity of its
Department of Internal Oversight Services, which evaluates the agency's
financial accounts, assesses the risk of fraud, and reviews the
adequacy and effectiveness of internal controls systems, by hiring
additional audit staff.[Footnote 34] However, UNRWA officials reported
that the department has not audited signed agency contracts to
determine if staff physically attach the General Conditions of
Contract, which include an antiterrorism clause and which must be in
every contract between UNRWA and a contractor. UNRWA told us that the
legal department ensures that all contracts contain these clauses. The
Department of Internal Oversight Services also reported on an agency-
wide risk management effort to identify high-risk areas in 2008 and has
planned audits related to UNRWA's internal justice system and emergency
assistance activities in the West Bank and Gaza funded by the agency's
Emergency Appeal request to donors. However, audits related to several
high-risk areas identified in the risk management exercise, such as the
Special Hardship Assistance Program in Gaza and Syria,[Footnote 35]
camp reconstruction activities in Lebanon and oversight in Gaza are
contingent on the availability of resources. In addition, since 2007,
this department has conducted five reviews related to UNRWA staff
screening processes and fraud prevention and detection, but none
focused on UNRWA's cash assistance program activities funded through
the General Fund or Emergency Appeal, such as cash subsidies for food
or selective or emergency cash assistance. UNRWA reported, however,
that approximately 10 percent of the department's work involves a
review of a food aid and cash assistance program. The European
Commission funds both the assistance program and its review. UNRWA told
us that future internal audits would assess UNRWA's compliance with its
neutrality and antiterrorism policies for contractors, as well as
internal controls for cash assistance. According to agency officials,
this will have resource implications for the agency.
While internal audits have not focused on UNRWA's overall cash
assistance activities, the UN Board of Auditors, UNRWA's external
auditor, reported on instances of breakdowns or weaknesses in internal
controls.[Footnote 36] UNRWA officials reported that after the agency
investigated a case of cash assistance fraud in Gaza, the agency
conducted a thorough reform of cash management procedures and held the
senior managers of the program accountable for the systemic weaknesses
identified and, in doing so, requested and accepted the early
retirement of the 2 most senior program staff. Specifically, UNRWA
reported that following this incident, the Gaza field office suspended
emergency cash assistance (other than for shelter) to individuals and
focused cash assistance instead on clearly defined target groups such
as students enrolled in UNRWA schools and refugees enrolled in the
Special Hardship program. In addition, UNRWA told us that it integrated
its Emergency Cash Assistance program into a stand-alone Emergency
Program, which includes a unit to monitor the integrity of emergency
services.
Conclusions:
It is an important U.S. goal to have processes in place to help ensure
that U.S. funding for Palestinian assistance programs is not provided
to individuals or entities engaged in terrorist activities. In recent
years, USAID, State, and UNRWA have strengthened their policies and
procedures to help ensure that assistance is not inadvertently provided
to terrorists. In response to our 2006 recommendation, USAID has
clarified its guidance and improved its system for vetting certain
recipients of USAID assistance, thereby significantly decreasing its
vetting times. In addition, State and UNRWA have agreed on a definition
of terrorism, which addresses a concern we raised in 2003.
USAID complied with all applicable antiterrorism-related requirements
when making its new prime awards in fiscal year 2008. Regarding prime
awardees' fiscal year 2008 subawards identified by USAID, required
vetting occurred and applicable antiterrorism certifications were
obtained. However, we estimate that for approximately 17 percent of the
fiscal year 2008 subawards identified by USAID, there was not
sufficient information to assess compliance. For the remaining
subawards, we estimate that 5 percent did not contain the mandatory
clauses at the time the subaward was made. In addition, the subaward
information reported by prime awardees was not always sufficient to
monitor compliance. Action needs to be taken to help ensure that
mandatory clauses are included within each document and that prime
awardees provide USAID with sufficient monthly information to clearly
demonstrate that mandatory clauses have been included in applicable
subawards.
State has strengthened policies and procedures to determine whether
UNRWA's efforts are consistent with its agreement to conform to U.S.
conditions on funds by, for example, recently introducing additional
mechanisms for communicating on section 301(c) issues with UNRWA.
However, State has neither defined criteria for evaluating UNRWA's
conformance with its commitment for accepting U.S. funds nor screened
names of UNRWA contractors against the OFAC list. UNRWA has
strengthened its policies and procedures to conform with conditions on
U.S. funds, such as expanding screening of all recipients of UNRWA
funds against the UN 1267 list, but UNRWA's internal audits do not
determine whether UNRWA contractors have signed contracts that include
the required antiterrorism clause or assess controls for UNRWA's
overall cash assistance program. Addressing these weaknesses would
provide greater assurance that assistance is not inadvertently being
provided to terrorists.
Recommendations for Executive Action:
To strengthen compliance with USAID policies and procedures at the
subaward level, we recommend that the Administrator of USAID take
action to help ensure that:
*the mandatory clauses are included within each subaward contract or
agreement or, when not included within the contract or agreement there
is sufficient evidence to clearly establish that the subawardee has
agreed to comply with mandatory clauses at the time the award is made;
and:
* prime awardees provide sufficiently detailed information in their
monthly subaward reports to clearly demonstrate that mandatory clauses
were included in the subaward at the time the award was made.
To help ensure that assistance is not inadvertently provided to
terrorists, we recommend that the Secretary of State consider taking
additional steps to oversee UNRWA's conformance with U.S. conditions on
funding, such as (1) establishing criteria to evaluate UNRWA's efforts;
(2) screening the names of UNRWA contractors against lists of
individuals and entities of concern to the United States; and (3)
monitoring UNRWA's commitment that future internal audits would assess
UNRWA's compliance with its neutrality and antiterrorism policies for
contractors as well as internal controls for cash assistance.
Agency Comments and Our Evaluation:
USAID, State, and UNRWA provided written comments on a draft of this
report (see appendices IV, V, and VI). USAID, State, and UNRWA outlined
actions they plan to take to implement our recommendations. USAID
stated that our work contributed positively to the continuous
improvement and strengthening of USAID West Bank and Gaza mission's
compliance with antiterrorism policies and procedures. However, USAID
disagreed with the extent of our finding that insufficient evidence was
present to assess whether a significant percentage of subawards were in
compliance. We maintain that evidence was insufficient because the only
references to the purchase orders that were included on the mandatory
clauses were individual handwritten annotations. It was not clear who
made the annotations and when those annotations were made. To implement
our recommendations USAID stated that it will issue new instructions to
the mission's prime awardees to help ensure that contracts and
agreements contain clear and specific references to attached clauses
and clauses likewise contain clear and specific references to the base
agreement. USAID also plans to instruct prime awardees to explain any
inconsistencies in their monthly subaward reports. Additionally, USAID
will require prime awardees to certify that their monthly subaward
reports are both accurate and complete.
State recognized that it is appropriate for the department to consider
taking additional steps to further ensure that U.S. assistance to UNRWA
is not inadvertently provided to terrorists. State concurred with two
parts of our recommendation. State said that it will work with UNRWA to
develop criteria, as appropriate, as well as reporting requirements,
which will be documented in State and UNRWA's Framework for Cooperation
for 2010. State also said that the internal audits we recommended would
prove beneficial to UNRWA's operations and conformance with section
301(c) and noted UNRWA's written commitment to conduct internal audits
of key UNRWA processes. State is actively assessing the feasibility of
screening names of UNRWA contractors against lists of individuals and
entities of concern to the United States. State said that addressing
two parts of our recommendation will have resource implications for
State and UNRWA, since additional resources would be required to
effectively screen names and conduct additional internal UNRWA audits.
UNRWA also welcomed our report and findings and made a commitment that
future internal UNRWA audits would assess the agency's compliance with
its neutrality and antiterrorism policies for contractors and internal
controls for cash assistance. UNRWA said it would facilitate State's
monitoring of this commitment and work with State to develop criteria
for UNRWA's conformance to section 301(c). In addition, USAID, State
and UNRWA provided technical comments on a draft of this report, which
we have incorporated as appropriate.
We are sending copies of this report to other congressional offices,
State, USAID, and UNRWA. The report also is available at no charge on
the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Other contacts and major contributors are
listed in appendix VII.
Signed by:
Thomas Melito:
Director, International Affairs and Trade:
List of Congressional Committees:
The Honorable Howard L. Berman:
Chairman:
The Honorable Ileana Ros-Lehtinen:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives:
The Honorable Gary L. Ackerman:
Chairman:
The Honorable Dan Burton:
Ranking Member:
Subcommittee on the Middle East and South Asia:
Committee on Foreign Affairs:
House of Representatives:
The Honorable Patrick Leahy:
Chairman:
The Honorable Judd Gregg:
Ranking Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations:
United States Senate:
The Honorable Nita M. Lowey:
Chair:
The Honorable Kay Granger:
Ranking Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to (1) assess the extent to which the U.S. Agency
for International Development (USAID) has complied with its policies
and procedures to help ensure that its programs do not provide support
to entities or individuals associated with terrorism in the West Bank
and Gaza and (2) assess the Department of State's (State) and UNRWA's
policies and procedures to support conformance with U.S. statutory
conditions placed on contributions provided to UNRWA to prohibit
funding of terrorist-related activities.
USAID Policies and Procedures:
To determine the extent to which the USAID Mission to the West Bank and
Gaza (the mission) complied--at the prime and subaward levels--with its
policies and procedures to help ensure that its programs do not provide
support to entities or individuals associated with terrorism in the
West Bank and Gaza, we identified relevant legal and other requirements
as well as USAID policies and procedures to comply with those
requirements. These legal and other requirements are contained in U.S.
appropriations laws, executive orders, and the U.S. code. Mission Order
21 is the mission's primary document that details the procedures to
comply with applicable laws and executive orders to help ensure that
assistance does not provide support to entities or individuals
associated with terrorism. The mission revised Mission Order 21
effective October 3, 2007 to update its antiterrorism procedures in
response to, among other things, recommendations we made in a 2006
report.
We discussed the mission's implementation of Mission Order 21 with the
USAID Mission Director, senior staff, regional legal advisor, program
staff, and other officials responsible for managing assistance projects
and overseeing contracts, grants, and cooperative agreements at the
USAID Mission in Tel Aviv, Israel, and the U.S. Consulate in Jerusalem.
We also interviewed five of USAID's implementing partners that had
received relatively large dollar contracts from USAID in the West Bank,
Jerusalem, and the United States. We interviewed State, USAID, and
other officials involved in vetting USAID award recipients. In
addition, we interviewed USAID's Regional Inspector General in Cairo to
determine the results of audits of West Bank and Gaza assistance
programs and steps taken to strengthen USAID's auditing procedures.
We focused our review on the mission's prime award contracts, grants,
and cooperative agreements and subawards that were made during fiscal
year 2008 through the Economic Support Fund, in accordance with the
mandate contained in the Consolidated Appropriations Act for fiscal
year 2008 (PL 110-161). To determine whether the mission's prime awards
contained the applicable antiterrorism certification and clauses as
required by Mission Order 21, we reviewed copies of all 32 new prime
awards issued by the mission during fiscal year 2008. To determine
whether the subawards complied with relevant Mission Order 21
requirements, we selected a random stratified sample of 95 subawards
made to non-U.S. organizations and 49 subawards made to U.S.
organizations, a total of 144 subawards. Initially, we selected a
random sample of 147 subawards. However, because one of the reported
subawards (to a U.S. organization) identified by USAID was not actually
executed, we had a random sample of 146 subawards. We also removed from
the sample 2 subawards that did not require mandatory clauses,
resulting in a random stratified sample of 144 subawards. Our sample of
49 subawards made to U.S. organizations was drawn from a subpopulation
of 101 subawards and our sample of 95 subawards made to non-U.S.
organizations was drawn from a subpopulation of 2,519 subawards. We
selected these subaward sample sizes to estimate compliance rates with
confidence intervals of no more than plus or minus 10 percent for both
the U.S. organizations and the non-U.S. organizations. The percentages
we report for all subawards are weighted to reflect the fact that we
oversampled the U.S. subawards in order to ensure that we obtained a
sufficient number for making projections for that strata.
We selected these random stratified samples from a universe of 2,620
new fiscal year 2008 subawards identified by the mission based on
subaward activity reported to the mission by prime awardees. The
mission developed the universe by assembling the subaward spreadsheets
that were available as of October 2008 and provided by each partner who
had an active prime award during the period from October 3, 2007
through September 30, 2008. The spreadsheets included U.S. and non-U.S.
subawards. From the subawards reported on these spreadsheets, the
mission identified subawards made during the period from October 1,
2007 through September 30, 2008 and filtered out all subawards made
outside of those dates. The mission then created a list containing the
names of the organizations receiving each subaward and the start and
end date of each subaward. At our request, the mission then added
information to the list to include the amount and type of each subaward
(e.g. contract, grant). In addition, if the mission found a subaward
reported in New Israeli Shekels, it replaced the amount in shekels with
an estimated conversion to U.S. dollars to help facilitate the GAO
selection process. In addition, if the mission found an entry with an
end date listed as "immediately," it replaced this word with a date
identical to the start date. The mission's objective was to include all
individual subaward agreements and exclude any extensions and
modifications to those awards. However, according to the mission, their
attempt to exclude extensions and modifications was limited to those
instances in which the information was available from the prime
awardee's monthly reports. As a result, our sample included several
modifications and extensions. In addition, our sample included 2
instances in which prime awardees bundled multiple procurements and
reported them as a single subaward. We did not attempt to correct for
these cases, but instead made a modification to the decision rules we
used to determine compliance.
We examined in detail (1) the vetting documentation maintained by the
mission on its Partner Vetting System (PVS) to determine if the mission
had vetted non-U.S. prime awardees and a sample of subawardees as
required by Mission Order 21 and (2) prime award and subaward
documentation for a sample of subawardees to determine if the
antiterrorism certifications were signed and the mandatory clauses were
included in the prime awards and subawards as required by Mission Order
21. We reviewed the vetting information in the PVS for all four prime
awards made to non-U.S. organizations and a random stratified sample of
95 subawards made to non-U.S. organizations. The remaining 28 prime
awards and 49 subawards were made to U.S. organizations, and so were
not subject to vetting. We compared the vetting date to the award date
to determine if the mission vetted the appropriate non-U.S.
organizations prior to the date of award. To understand the mission's
vetting process, we interviewed various mission officials including the
head of the Program Support Unit, which is the division responsible for
the vetting process. To determine whether the subawards contained the
required mandatory clauses and whether required antiterrorism
certifications were obtained, we reviewed applicable documentation for
a random sample of 95 subawards made to non-U.S. organizations and 49
subawards made to U.S. organizations, a total of 144 subawards.
UNRWA Policies and Procedures:
To assess UNRWA's and State's policies and procedures to support
conformance with U.S. statutory conditions placed on assistance to
UNRWA, we reviewed the applicable federal law--section 301(c) of the
Foreign Assistance Act of 1961, as amended. We also reviewed
documentation on 3 Frameworks for Cooperation between State and UNRWA
and 10 U.S. contributions letters that describe UNRWA's agreement to
conform with U.S. conditions on funds for 2007 through 2009; State's
processes for overseeing UNRWA's conformance to U.S. conditions; and
documents describing State discussions on UNRWA's conformance to U.S.
conditions. We also interviewed State officials in Amman, Jordan;
Jerusalem; and Washington D.C., including the Regional Refugee
Coordinator in Jerusalem, who are responsible for implementing section
301(c) and overseeing U.S. contributions to UNRWA.
To describe UNRWA policies and procedures to help ensure that all
possible measures were taken to assure U.S. funds were not used to
furnish assistance to any refugee who, among other things, engaged in
any act of terrorism, we reviewed our 2003 report on UNRWA,[Footnote
37] as well as UNRWA and UN budget, policy, and program documents for
fiscal years 2007 and 2008. We also examined five UNRWA semiannual
reports on UNRWA's efforts to conform to agreements with U.S.
conditions on funds from July 2006 through December 2008. These reports
provide data on staff disciplinary actions, denial of benefits to
refugees, inspections of and incursions into UNRWA facilities, and
screening of recipients of UNRWA funds against the UN Security
Council's Al-Qaida and Taliban Sanctions Committee Consolidated List
(UN 1267 list). We also interviewed UNRWA headquarters and field
officials in Amman, Jordan and Jerusalem responsible for implementing
and overseeing UNRWA's programs, including the Commissioner-General;
Deputy Commissioner-General; Directors of UNRWA Field Offices; senior
officials in the Departments of Administrative Support, Finance,
Internal Oversight, Legal Affairs, and several program offices; and
staff responsible for monitoring facilities in the West Bank and Gaza
areas. Furthermore, to obtain information on UNRWA's programs and
oversight activities in the agency's refugee camps, we visited three
camps in the West Bank and outside Amman (Jalazone, Jabal el-Hussein,
and Baqa'a refugee camps) where we spoke with UNRWA staff and
Palestinian refugees about their understanding of the agency's policies
and procedures. We also met with an official from the government of
Israel's Ministry of Foreign Affairs Department for UN Political
Affairs.
Additionally, we compared a list of contractors used by UNRWA from 2002
to 2009 with the U.S. Department of Treasury's Office of Foreign Assets
Controls (OFAC) Specially Designated Nationals and Blocked Persons
list, as of February 3, 2009. Our relatively basic computerized
matching comparison focused strictly on the "name" field supplied by
UNRWA and OFAC, including both individuals and entities, although
information for the place of birth and date of birth fields were
available for some individuals in the OFAC list. The UNRWA list
contained approximately 20,000 records with names, while the OFAC list
contained approximately 9,000 primary names and more than 5,000
aliases. We removed "tokens" or parts of names, such as prefixes or
suffixes on names, in each list to make the matching process possible.
For the UNRWA list of names, we then removed any name which only
comprised one token, such as the name "Ali." The original OFAC list
contained a string of information including names, dates of birth, and
places of birth that were wrapped on multiple lines. After converting
the data into a more usable form, taking into account both primary
names and aliases, we were able to produce a usable file from the OFAC
list with approximately 14,600 names.
Matching was complicated by a number of factors, such as name formats
that varied, many names that had been translated from foreign
languages, and multiple aliases for some of the individuals named. We
addressed these issues to the extent possible with the available
software and performed a comparison of these names to produce potential
matches between the two lists. While a perfect match between the two
lists would require the records in each list to be identically matched,
we found that names in the two lists may have varied in terms of the
number of tokens, punctuation considerations, the translation of
foreign sounding names and variations in spelling. Therefore, we
identified records that were reasonably similar to be potential
matches. For each potential match, we performed a manual review of the
available information on the records using other Internet sources, to
help determine whether these were possible matches. It is worth noting
that more sophisticated software, specifically dedicated to the Arabic
language that takes into account linguistics or phonetic sounds for
each name, may reveal additional information about potential matches.
We conducted this performance audit from August 2008 to May 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: USAID Mission to the West Bank and Gaza Vetting Process:
Mission Order 21 states that the USAID Mission to the West Bank and
Gaza must vet certain non-U.S. recipients of USAID funding, which
involves checking recipients' names and other identifying information
against databases and other information sources to determine if they
are involved with terrorism. The Program Support Unit (PSU) at the
USAID Mission coordinates the vetting process for those requiring
vetting, as shown in figure 1.
Figure 1: USAID's Vetting Process for Awards to Aid Palestinians,
Fiscal Year 2008:
[Refer to PDF for image: illustration]
1. Potential awardees submit vetting forms either directly or through a
prime awardee to the COTR or AOTR who reviews and submits them to PSU
in Tel Aviv.
2. PSU in Tel Aviv: Verifies that vetting information is complete;
Enters information into Partner Vetting System.
3. USAID‘s Vetting Center in Washington, D.C. runs names against data
bases.
4. Vetting results generated.
5. PSU reviews vetting results in Tel Aviv.
6. Did the Vetting Center in Washington, D.C. find possible derogatory
information? (Decision point)
If no, proceed to #7;
If yes, skip to #14.
7. Is the award in the form of a contract to a organization or any
award to an individual? (Decision point)
If no, skip to #11;
If yes, proceed to #8.
8. USAID proceeds with award.
9. PSU records final results in Partner Vetting System.
10. USAID notifies prime awardee of results.
11. Is the assistance award in the form of cash or in-kind assistance,
under a cooperative agreement, grant or subgrant regardless of dollar
amount including grants under contracts? (Decision point) If yes,
proceed to #12.
12. Consulate General in Jerusalem conducts secondary vetting for cash
or in-kind assistance awards to organizations.
13. Did the Consulate General in Jerusalem find possible derogatory
information during secondary vetting? (Decision point)
If no, go back to #8;
If yes, proceed to #14.
14. PSU consults with Deputy Mission Director and CTO on vetting
results. Mission can request additional identifying information from the
potential awardee.
15. Does the Deputy Mission Director agree that the information is
derogatory? (Decision point)
If no, proceed to #16;
If yes, skip to #19.
16. Vetting Working Group in Jerusalem reviews all information and
renders a recommendation.
17. Consul General in Jerusalem reviews Vetting Working Group
recommendation.
18. Did Consul General determine that information is derogatory?
(Decision point)
If no, go to #8;
If yes, proceed to #19.
19. USAID disapproves award or subaward. (Award not made)
Go to #9.
Source: GAO analysis of USAID documents and Art Explosion.
Note: The following acronyms refer to USAID personnel who manage
awards: Contracting Officer's Technical Representative (COTR),
Agreement Officer's Technical Representative (AOTR), and Cognizant
Technical Officer (CTO).
[End of figure]
[End of section]
Appendix III: UNRWA Policies and Procedures for Cash Assistance, Staff
Neutrality, Use of UNRWA Facilities, and Contractor Behavior:
UNRWA has several policies and procedures to help support UN neutrality
and UNRWA's conformance with conditions on receiving U.S. funds. This
appendix provides additional information on specific policies and
procedures that UNRWA uses to implement its cash assistance activities
and promote the neutrality of agency staff, facilities, and
contractors.
Policies for Cash Assistance to Refugees:
Policies for Special Hardship and Cash Assistance:
UNRWA has policies to oversee the relief and social services assistance
it provides to refugees, including special instructions for Special
Hardship, selective, and emergency cash assistance.[Footnote 38] UNRWA
policy is to provide Special Hardship cash subsidies for food only to
registered Palestinian refugees. In addition, UNRWA staff are to screen
applicants' eligibility for cash assistance. The screening process
includes a home visit by a social worker and follow-up checks to ensure
assistance has been used for the designated purpose. Under written
UNRWA instructions for assistance, if a family has other sources of
income, such as Palestinian Authority ministries or charitable
organizations, it may be disqualified from receiving UNRWA cash
assistance. Agency officials also reported that UNRWA uses a
computerized distribution list for Special Hardship cash subsidies for
food, which has been reviewed by finance and social services staff in
the field. Similarly, agency policy states that senior field staff are
responsible for overseeing cash distributions, a social worker is
required to be present at each distribution point, and refugees must
provide certain documentation to receive cash assistance. In addition,
senior officials in the Department of Relief and Social Services are
required to conduct random visits and review case files to ensure
proper handling of Special Hardship cases by social workers and staff.
Social workers are also to rotate among areas to alleviate social
pressures they may face from refugees. UNRWA also recently introduced
the use of a needs-based formula, the proxy means test formula, as
criteria for receipt of certain social services, such as Special
Hardship assistance, in order to target benefits to those in most need.
Other Policies for Cash Assistance:
UNRWA has additional measures to oversee its cash assistance
activities. For example, for both selective and emergency UNRWA cash
assistance, UNRWA policy is that social workers are to make field
inquiries to examine an applicant's emergency circumstances prior to
making a recommendation for assistance. Depending on the amount of
assistance recommended, senior relief and social services officials at
varying levels of hierarchy must then review the recommendation. Social
workers are to conduct follow-up visits with beneficiaries, and senior
field officials are to perform random checks to determine whether funds
are spent for approved uses. In addition, relief and social services
officials in the field must report monthly to the head of the
department on any selective or emergency cash assistance approved and
issued.
Policies and Procedures to Promote UNRWA Staff Neutrality:
UNRWA reported that it has implemented various policies and procedures
to promote staff neutrality, including both pre-and post-hire policies
on staff behavior. In cases where UNRWA investigates and finds staff
behavior inconsistent with UNRWA policies, UNRWA policy is to
discipline or terminate the staff.
General Policies for UNRWA Staff Neutrality:
UNRWA reported that it has implemented various policies and procedures
to promote staff neutrality. For example, UNRWA requires staff to sign
a neutrality pledge in each employment contract and an annual
verification statement on outside activities. Officials reported that
staff receive information on neutrality policies during their induction
upon employment, including training on UNRWA privileges, immunities and
responsibilities, and staff receive ongoing guidance from senior
officials in the field and headquarters. UNRWA staff rules also require
staff members to avoid actions and public pronouncements that may
adversely reflect on the integrity, independence and impartiality
required by their positions. While UNRWA does not expect staff to give
up their national sentiments or their political and religious
convictions, the agency requires staff to bear in mind the reserve and
tact incumbent upon them by their employment at UNRWA. For instance,
staff may exercise their right to vote, but may not engage in any
political activity inconsistent with independence and impartiality.
UNRWA staff rules and regulations do not prohibit membership in and
payment of normal financial contributions to a political party,
provided that membership does not obligate, entail or result in
statements or actions that violate the staff member's UN neutrality and
impartiality obligations.
Prehire Policies for UNRWA Staff Neutrality:
Officials reported that UNRWA performs reference checks and background
security clearances in accordance with the policies for each field
office area and asks whether applicants have been convicted of any
crimes prior to hiring them. The screening processes differ by level of
staff responsibility and the type of governance and security structures
in the field area. UNRWA conducts background and security screenings
with the assistance of the governments of Jordan and Syria in those
field areas, under agreements UNRWA negotiated with host governments
during early years of agency operations in the 1950s. For example, in
Jordan, once a hiring review board has selected a candidate for a
position, UNRWA will send the Government of Jordan a formal notice
asking if the government has any concerns regarding the individual; the
government then performs a security screening. Representatives from the
governments of Jordan and Syria are also members of the UNRWA hiring
panel in those field areas and may provide input on potential staff.
UNRWA reported instances in which a government did not approve of UNRWA
hiring an individual, and although UNRWA was not told the reason for
the concerns, the individual was not hired. UNRWA also shares the names
of all staff with host governments, including Israel and the
Palestinian Authority, on an annual basis under the 1946 Convention on
the Privileges and Immunities of the United Nations.
Policies for Investigating UNRWA Staff Behavior:
UNRWA has also established procedures to investigate inappropriate
staff behavior, which may result in the disciplining or termination of
staff. For example, investigations may consist of fact-finding
investigations or formal Boards of Inquiry involving legal officers or
senior management, with the technical assistance of UNRWA's Department
of Legal Affairs or Department of Internal Oversight Services. Staff
members have an obligation to report misconduct and are protected from
retaliation under UNRWA's whistleblower and antireprisal policy, and
according to officials, the agency takes swift disciplinary action
whenever there is evidence of staff member involvement in inappropriate
political or military activities. Officials stated that this
disciplinary action is well-known, predictable and consistent, and has
a deterrent effect. UNRWA told us the agency also has formal procedures
for staff to appeal investigation results through the UNRWA Joint
Appeals Board, but the Commissioner General is responsible for all
final determinations. Staff may also seek recourse after the UNRWA
Joint Appeals Board process through the UN Administrative Tribunal, the
decision of which is binding on UNRWA as a UN agency.[Footnote 39]
Rules and Regulations for the Use of UNRWA Facilities by Outside
Entities:
UNRWA field offices have established rules and regulations for the use
of UNRWA facilities in Jordan, Lebanon, and the West Bank by outside
entities, and the Gaza and Syria field offices have a policy of not
permitting use of UNRWA facilities by any outside entity. Use of UNRWA
facilities in Jordan, Lebanon and the West Bank requires a formal
written request and approval by the field office director. Officials
reported that a general condition of any UNRWA approval is that the
organization using an UNRWA facility respects UN neutrality, and UNRWA
may monitor the event. The agency also has a policy of approving use of
facilities for non-political activities only. However, UNRWA told us
that it does allow governmental authorities to request the use of
facilities for polling stations, providing that campaigning is not
present. For example, the government of Jordan has used UNRWA schools
as polling stations. Officials reported that the agency has also
allowed the use of its facilities for other approved purposes,
including use by UNRWA summer camps and by international organizations
such as the United Nations Children's Fund and World Health
Organization. In addition, certain community-based organizations,
affiliated to varying extents with UNRWA, may use premises provided by
UNRWA in all five fields of operation, pursuant to conditions in a
memorandum of understanding. Officials reported that relief and social
services staff work closely with and monitor such organizations.
Policies and Procedures Regarding Contractor Behavior:
UNRWA's procurement policies and procedures communicate the agency's
expectations for contractor behavior. In addition to its General
Conditions for Contract, which includes an antiterrorism clause, when
signing contracts with the agency, contractors must also abide by the
UN Supplier Code of Conduct, which includes a conflict of interest and
corruption clause and outlines corporate policies and practices
expected of all UN suppliers. According to UNRWA officials, as a UN
agency, UNRWA also checks contractors against the UN Suspended/Removed
Vendor Report, which identifies those vendors confirmed to be doing
business in an unethical or corrupt manner. Individual contracts are
managed by procurement staff in the Department of Administrative
Services, and officials reported that any inappropriate conduct would
result in a termination of contract.
[End of section]
Appendix IV: Comments from the U.S. Agency for International
Development:
Note: A GAO comment supplementing those in the report text appear at
the end of this appendix.
USAID:
From The American People:
U.S. Agency for International Development:
1300 Pennsylvania Avenue, NW:
Washington, DC 20523:
[hyperlink, http://www.usaid.gov]
May 8, 2009:
Mr. Thomas Melito, Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Melito:
I am pleased to provide the U.S. Agency for International Development's
(USAID) formal response on the draft GAO report entitled "Foreign
Assistance: Measures to Prevent Inadvertent Payments to Terrorists
under Palestinian Aid Programs Have Been Strengthened, but Some
Weaknesses Remain" (GAO-09-622). Our comments are limited to those
sections of the report concerning USAID's assistance and operations.
The GAO team's field work and draft report contributes positively to
the continuous improvement and strengthening of USAID West Bank/Gaza's
compliance with antiterrorism policies and procedures. We are pleased
to note that the draft GAO report recognized USAID's full compliance
with vetting and anti-terrorism certification policies and procedures
with respect to both prime awards and the audited subaward sample.
The GAO's principal finding related to compliance with the inclusion of
mandatory clauses in subawards. This finding was based on an estimate
that a significant percentage of all fiscal year 2008 subawards do not
contain sufficient evidence to assess whether required clauses form
part of the subawards. USAID asserts that there is adequate evidence
that the mandatory clauses do form part of the awards. USAID
contracting officers and other employees familiar with procedures for
issuing contracts and grants were able to confirm that the mandatory
provisions formed part of each award, with only one exception. As a
result, we believe the GAO's assertion of insufficient evidence should
be reconsidered. [See comment 1]
In either case, there are steps that USAID can take to further
strengthen prime awardee file documentation and reporting that will
also address the GAO's concerns. In the draft report, the GAO
recommends that the Administrator of USAID strengthen compliance with
USAID policies and procedures at the subaward level by ensuring that:
(a) mandatory clauses are included within each subaward contract or
agreement, or, when handled outside the contract or agreement there is
sufficient evidence to clearly establish that the subawardee has agreed
to comply with mandatory clauses at the time the award is made; and (b)
prime awardees provide sufficiently detailed information in their
monthly subaward reports to clearly demonstrate that mandatory clauses
were included in the subaward at the time the award was made.
In order to implement the GAO's recommendations, USAID will issue new
instructions to its prime awardees under the West Bank and Gaza program
to ensure that contracts and agreements contain clear and specific
references to attached clauses and that attached clauses, likewise,
contain clear and specific references to the base agreement.
Furthermore, prime awardees will also be instructed to explain any
inconsistencies between the dates on which mandatory clauses were
incorporated into subawards and the dates of the subawards themselves.
Lastly, prime awardees will certify to the completeness and accuracy of
the monthly subaward report. USAID believes that these new measures,
combined with USAID's semi-annual compliance reviews of all prime
awardee subaward files, addresses the draft report's underlying
concern, namely, ensuring that required clauses are included in
subawards at the time the subawards are made. In addition, USAID's
proposed action will provide greater assurance that the GAO will have
the evidence it requires to audit prime awardee compliance in the
future.
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:
Drew W. Luten:
Acting Assistant Administrator:
Bureau for Management:
The following is GAO's comment on USAID's letter dated May 8, 2009.
GAO Comment:
1. We maintain that evidence was insufficient to assess compliance
because the only references to the purchase orders that were included
on the mandatory clauses were individual handwritten annotations. It
was not clear who made the annotations and when those annotations were
made.
[End of section]
Appendix V: Comments from the U.S. Department of State:
United States Department of State:
Washington, D.C. 20520
May 6, 2009:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "Foreign
Assistance: Measures to Prevent Inadvertent Payments to Terrorists
under Palestinian Aid Programs Have Been Strengthened, but Some
Weaknesses Remain," " GAO lob Code 320618.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Monique Ramgoolie, Program Officer, Bureau of Population, Refugees and
Migration at (202) 663-3103.
Sincerely,
Signed by:
James L. Millette:
cc: GAO - Cheryl Goodman:
PRM - Samuel Witten (Acting):
State/OIG - Mark Duda:
[End of letter]
Department of State Comments on Draft GAO Report:
Foreign Assistance: Measures to Prevent Inadvertent Payments to
Terrorists under Palestinian Aid Programs have been Strengthened, but
Some Weaknesses Remain (GAO-PUB No. 09-622, GAO Code 320618):
Thank you for allowing the Department of State the opportunity to
comment on the draft report, "Measures to Prevent Inadvertent Payments
to Terrorists under Palestinian Aid Programs have been Strengthened,
but Some Weaknesses Remain." As the GAO has found, the State Department
has strengthened policies and procedures related to monitoring of the
United Nations Relief and Works Agency for Palestine Refugees in the
Near East (UNRWA) with regard to its conformance with the condition
required by section 301(c) of the Foreign Assistance Act of 1961, as
amended. Indeed, significant progress has been made since the 2003 GAO
assessment on monitoring in general. We recognize, as does GAO, that it
is appropriate for the Department to consider taking additional steps
to enhance and formalize the measures implemented by the Department to
further ensure that USG assistance to UNRWA for its critical operations
is not inadvertently provided to terrorists. In this light, we
appreciate the recommendations offered by the GAO.
Recommendations for Executive Action:
The GAO recommends that the Secretary of State consider taking
additional steps to oversee UNRWA's conformance with U.S. conditions on
funding, such as: (1) establishing criteria to evaluate UNRWA's
efforts; (2) screening the names of UNRWA contractors against lists of
individuals and entities of concern to the United States; and (3)
monitoring UNRWA's commitment that future internal audits would assess
UNRWA's compliance with its neutrality and antiterrorism policies as
well as its internal controls for cash assistance.
Establishing Criteria to Evaluate UNRWA's Efforts:
The Department of State concurs with this recommendation. Currently,
the Department, particularly the Bureau of Population, Refugees, and
Migration (PRM), monitors UNRWA's activities, reports, and performance
on an ongoing basis with respect to UNRWA's conformance with the
condition required by section 301(c). We undertake an immediate review
of any information or allegations related to section 301(c) by
requesting details from UNRWA, including its actions to address any
allegations or incidents. We also review closely UNRWA's 301(c)
reports, provided to the Department on a semi-annual basis, asking
UNRWA for additional details and clarification whenever necessary.
As noted in the GAO report, continued USG funding for UNRWA is
contingent upon the Department's conclusion that UNRWA continues to
take the steps necessary to meet the condition required by section
301(c). This condition is included in the annual USG-UNRWA Framework
for Cooperation as well as in all contribution letters that obligate
Migration and Refugee Assistance (MRA) and Emergency Refugee Migration
Assistance (ERMA) funds to UNRWA. The Department and UNRWA have worked
continuously to enhance both UNRWA's policies and procedures and
State/PRM's oversight of UNRWA's activities as they relate to section
301(c) and other due diligence measures. For example, with the
encouragement and funding of the USG, UNRWA has developed the
successful Operations Support Officer (OSO) program in the West Bank
and Gaza. As the GAO report notes, in April 2009, the Department
approved funds for the establishment of an OSO program in Lebanon.
The GAO report includes several new policies undertaken by the
Department to improve oversight by enhancing communication with UNRWA
on issues related to 301(c). These procedures were designed to
formalize already existing but less formal means of communication
between the Department of State and UNRWA. In a similar vein, the
Department will work with UNRWA to develop a formalized checklist of
criteria including those mechanisms already used informally to evaluate
UNRWA's conformance with the condition required by 301(c), such as the
number of OSO inspections and checks against the UN Security Council
Resolution 1267 list (Al Qaida and Taliban) sanctions regime. The
Department will work together with UNRWA to develop criteria, as
appropriate, as well as reporting requirements, the modalities of which
will be included in future Frameworks for Cooperation beginning in
2010.
Screening Names of UNRWA contractors against Lists of Individuals and
Entities of Concern to the United States:
The Department of State is actively assessing the feasibility of this
recommendation. State/PRM is in the process of discussing this issue
with other personnel within the Department, from other U.S. Government
agencies, and with UNRWA. UNRWA has confirmed that it already screens
its list of potential vendors against the list of persons designated
under UN Security Council Resolution 1267. UNRWA has also confirmed to
the Department that it would use information provided by us regarding
potential individuals and entities of concern as a trigger to conduct
its own investigations as relevant. (As the GAO report notes, in 2006
the UN declined a request from the Department to screen all of its
potential contractual and financial arrangements against the list of
specially designated nationals maintained by the Treasury Department's
Office of Foreign Assets Control.)
The Department has some concerns that the resources required to
undertake effective screening may not be commensurate with the benefits
that would be achieved from such a program, in light of the costs that
would likely be associated with screening and the controls that UNRWA
already has in place. However, State/PRM, in coordination with other
offices within the Department as well as other USG agencies, is
actively reviewing and researching this matter to see whether there is
a feasible mechanism to implement this recommendation.
Monitoring UNRWA' Commitments regarding Future Internal Audits:
The Department of State concurs with this recommendation and notes that
in January 2009, UNRWA committed in writing to conduct internal audits
of key elements of UNRWA processes, including those related to
appropriate inclusion of anti-terrorism clauses in UNRWA contracts as
well as cash assistance. The Department believes that internal audits
on these topics, as recommended by GAO, would prove beneficial to
UNRWA's operations and continued conformance of the condition required
by section 301(c). The Department understands that conducting these
internal audits would result in additional costs to UNRWA, which
already suffers from chronic underfunding. The Department is exploring
funding options to enhance UNRWA's capacity for internal audits,
including in these two areas.
[End of section]
Appendix VI: Comments from the United Nations Relief and Works Agency
for Palestine Refugees in the Near East:
UNRWA:
United Nations Relief and Works Agency for Palestine Refugees in the
Near East:
UNRWA Headquarters Gaza, Office of the Commissioner-General:
c/o hq amman:
PO Box 140157:
Amman 11814:
Jordan:
t: +972 8 6777700:
+962 6 5808556:
f: +97286777699:
+962 6 5808179:
[hyperlink, http://www.unrwa.org]
7 May, 2009:
Dear Mr. Melito,
Thank you for requesting our comments on the draft GAO report, "Foreign
Assistance: Measures to Prevent Inadvertent Payments to Terrorists
under Palestinian Aid Programs Have Been Strengthened, but Some
Weaknesses Remain" (GAO-PUB No. 09-622. GAO Code 320618).
UNRWA welcomes GAO's review, report and findings. The Agency cooperated
fully with the review and appreciates GAO's collaborative and
constructive approach throughout the process.
UNRWA will work closely with the US Department of State to further
develop criteria to evaluate those internal processes and mechanisms
that strengthen its compliance with US conditions of funding. UNRWA has
also made a commitment that future internal UNRWA audits would assess
the Agency's compliance with its neutrality/anti-terrorism policies for
contractors as well as internal controls for cash assistance and will
facilitate monitoring by State of this commitment.
I take this opportunity to confirm that UNRWA is committed, in
accordance with UN principles and policies, to UN neutrality,
transparency, accountability and conformance with donor funding
conditions. I would also like to express my sincere appreciation for
the vital support of the Government of the United States for the
humanitarian and human development mission of the Agency.
Yours sincerely,
Karen Koning AbuZayd:
Commissioner-General:
[End of section]
Appendix VII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Thomas Melito, (202) 512-9601 or melitot@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Cheryl Goodman, Assistant
Director; Ashley Alley; Debbie Chung; John Craig; Martin de Alteriis,
Justin Fisher, Mitchell Karpman, Justin Monroe, Mary Moutsos; John
Reilly; Suneeti Shah; Elizabeth Singer; and Omar Torres made key
contributions to this report.
[End of section]
Footnotes:
[1] Throughout this report, we use the term "prime awardee" to refer to
an organization that directly receives USAID contracts, grants, or
cooperative agreements to implement U.S. assistance projects.
"Subawardee" refers to an organization that receives subcontracts or
subgrants from prime awardees for work on U.S. assistance projects.
[2] Consolidated Appropriations Act of 2008, Pub.Law No. 110-161, Dec.
26, 2007.
[3] This report addresses the extent to which USAID has applied its
policies and procedures to new awards funded through the Economic
Support Fund in the West Bank and Gaza Program for fiscal year 2008. A
separate GAO review will address additional issues regarding the
treatment, handling, and uses of all funds for the bilateral West Bank
and Gaza Program in fiscal year 2008.
[4] State, Foreign Operations, and Related Program Appropriations Bill.
110th Cong., 1st sess. (June 18, 2007).
[5] See GAO, Department of State (State) and United Nations Relief and
Works Agency (UNRWA) Actions to Implement Section 301(c) of the Foreign
Assistance Act of 1961, [hyperlink,
http://www.gao.gov/products/GAO-04-276R] (Washington, D.C.: Nov. 17,
2003).
[6] See 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, [hyperlink,
http://www.gao.gov/products/GAO-06-1062R] (Washington, D.C.: Sept. 29,
2006).
[7] Section 657(c)(1), Consolidated Appropriations Act of 2008, PL 110-
161, Dec. 26, 2007.
[8] Mission Order 21 cites several legal authorities for its
antiterrorism procedures. These include (1) Executive Order 13224
(Sept. 23, 2001), which blocks property and prohibits transactions with
persons who commit, threaten to commit, or support terrorism; (2)
sections 2339A and 2339B of Title 18 of the U.S. Code which prohibit
the provision of material support or resources for terrorist acts or to
designated foreign terrorist organizations; and (3) Executive Orders
12947 (Jan. 23, 1995) and 13099 (Aug. 20, 1998) which prohibit
transactions with terrorists who threaten to disrupt the Middle East
peace process. Mission Order 21 also includes provisions of special
relevance to the USAID Mission in the West Bank and Gaza in Section 559
of the Foreign Operations Export Financing and Related Programs
Appropriations Act, 2006 (Pub. Law No. 109-102). Similar provisions
have appeared in subsequent appropriations acts, including the
Consolidated Appropriations Act of 2008.
[9] The list of individuals and entities subject to economic and trade
sanctions based on U.S. foreign policy and national security goals is
formally called the Specially Designated Nationals and Blocked Persons
list and commonly referred to as the OFAC list. OFAC publishes the list
as part of its efforts to administer and enforce U.S. sanctions
programs.
[10] The UN Security Council's "Consolidated List established and
maintained by the 1267 Committee with respect to Al-Qaida, Usama bin
Laden, and the Taliban and other individuals, groups, undertakings and
entities associated with them" is referred to as the UN 1267 list. The
Security Council's Al-Qaida and Taliban Sanctions Committee established
the list pursuant to paragraph 6 of Security Council resolution 1267
(Oct. 15, 1999) and the committee oversees governments' implementation
of the three sanctions measures (assets freeze, travel ban, and arms
embargo) imposed by the Security Council on individuals and entities on
the list.
[11] 22 U.S.C. § 2221(c).
[12] [hyperlink, http://www.gao.gov/products/GAO-06-1062R]. These other
types of assistance instruments include consulting agreements, letters
of understanding, memorandums of understanding, and purchase orders.
[13] Since 2003, annual appropriation acts have required the
Administrator of USAID to ensure that audits of all contractors and
grantees, and significant subcontractors and subgrantees, under the
West Bank and Gaza Program, are conducted on at least an annual basis.
In furtherance of this requirement, the USAID Inspector General has
implemented a program to audit these entities annually. USAID's
Regional Inspector General must, according to its own policies, audit
the prime awardees and significant subawardees every fiscal year. While
a single awardee may receive multiple prime awards for services, only
one of those prime awards is audited each fiscal year. The Regional
Inspector General has defined significant subawards as those that have
a cumulative cost of $300,000 or higher per fiscal year.
[14] The three prime awardees required to submit antiterrorism
certifications had signed the certifications prior to the date of the
award, as required.
[15] USAID may approve assistance to such a facility only if it
determines that the purpose and practical effect of such assistance
will not be to provide recognition to such a person or group.
[16] These four new prime awards required vetting because they were
awarded to non-U.S. organizations for amounts greater than $25,000.
[17] We evaluated a random sample of 144 subawards for compliance with
applicable requirements from Mission Order 21. In selecting our random
sample, we selected two random subsamples--one consisting of 49 U.S.
organizations and individuals and another consisting of 95 non-U.S.
organizations and individuals--because the vetting requirements are
only applicable to non-U.S. organizations. Of the 95 non-U.S.
organizations, 9 were exempt from the vetting requirements, 51 were
subject to pre-award vetting because the amount of the award exceeded
$25,000, and the remaining 35 were for amounts below the $25,000
vetting threshold.
[18] Our sample included 14 grants, six of which were made to
nongovernmental organizations and thus were required to have an
antiterrorism certification, according to Mission Order 21. The
remaining eight grants were made to either individuals or governmental
entities and thus did not require an antiterrorism certification.
[19] We conducted a probability sample of new subawards, stratified by
either U.S. or non-U.S. subawardees. With a probability sample, each
subaward in the population had a non-zero probability of being
included, and that probability could be computed for any member. Each
sample element selected was subsequently weighted in the analysis to
account statistically for all the members of the population. The result
of the sample can be projected to the population from which it was
selected. Because our sample selection was based on random selections,
it was only one of a large number of samples that might have been
drawn. Since each sample could have provided different estimates, we
express our confidence in the precision of our particular sample's
result as a 95 percent confidence interval (e.g., plus or minus 7
percentage points). This is the interval that would contain the actual
population value for 95 percent of the samples we could have drawn. As
a result, we are 95 percent confident that each of the confidence
intervals included within this report will include the true values in
the study population.
[20] USAID provided us 6 sets of annotated mandatory clauses for a
total of 14 separate subawards.
[21] This estimate was weighted to reflect the fact that we selected 49
out of a total of 101 U.S. subawards and 95 out of a total of 2,519 non-
U.S. subawards. See appendix I for more information on our methodology.
[22] The International Convention for the Suppression of the Financing
of Terrorism defines an offense under the convention to include an
offense within the scope of and as defined in any of the nine treaties
listed in the annex to the convention, as well as any other act
intended to cause death or serious bodily injury to a civilian or any
other person not taking an active part in the hostilities in a
situation of armed conflict, when the purpose of such act is to
intimidate a population or compel a government or international
organization to do or abstain from doing any act. International
Convention for the Suppression of the Financing of Terrorism, U.N. Doc
A/RES/54/109 (Dec. 9, 1999).
[23] State reported that continued U.S. funding for UNRWA is contingent
upon State's conclusion that UNRWA continues to take the steps required
to meet the conditions required by section 301(c). As part of State's
formal financial approval processes, State's Office of the Legal
Adviser closely reviews all spending plans, taking section 301(c) and
other legal requirements into consideration; these spending plans are
cleared by all relevant bureaus with interests in the funding, with
final approval by the Director of Foreign Assistance. Each contribution
to UNRWA is approved by the Assistant Secretary of State's Bureau of
Population, Refugees and Migration (PRM) based on a written paper that
includes a section reviewing UNRWA's conformance with the condition
required by section 301(c). However, we found that this written paper
is not an evaluation or determination of UNRWA's conformance with
conditions in section 301(c).
[24] [hyperlink, http://www.gao.gov/products/GAO-04-276R].
[25] [hyperlink, http://www.gao.gov/products/GAO-04-276R].
[26] In responding to a U.S. request that UN agencies vet prospective
and current arrangements against the OFAC list, the UN Legal Counsel
told State in a January 2006 letter that it would not be appropriate
for the UN to establish a verification regime that uses a list
developed by one member state, such as the OFAC list.
[27] UNRWA provided us with a list of roughly 20,000 contractors it
paid between 2002 and 2009. We narrowed the list to about 15,000
contractors by, among other things, eliminating any record that only
contained 1 part of an individual's name. We used a relatively basic
methodology to identify potential matches. We did not find any perfect
matches, since a perfect match between the two lists would require the
records in each list to be identically matched, and we found that names
in the two lists varied in the number of name parts, the translation of
Arabic names to English, spelling, and the type of demographic
information included. An example of a possible match would be when we
found names in both lists that were similar but were spelled
differently. Determining with greater confidence whether other names
are a likely match requires additional research and more advanced
procedures. See appendix I for more information on our methodology.
[28] UNRWA reported that it plans to submit additional information to
State on any denials of requests for assistance arising from the
Israeli "Operation Cast Lead" in the Gaza Strip from December 27, 2008
to January 19, 2009, in its semiannual compliance report covering the
period from January 2009 to June 2009.
[29] UNRWA officials told us that following media reports alleging that
people elected in March 2009 to positions in an UNRWA teachers' union
were affiliated with political parties, the agency opened an
investigation as required by and in accordance with UNRWA's Staff Rules
and Regulations. That investigation is ongoing. UNRWA officials said
disciplinary action will be taken if the results of the investigation
show involvement of staff members in political activities contrary to
UNRWA staff rules and regulations.
[30] The Commissioner-General launched a comprehensive organizational
development initiative in late 2005 designed to strengthen and sustain
UNRWA's capacity for program management and delivery, which resulted in
an organizational development strategic plan for the 2006 to 2009 time
period. Goals of the plan include ensuring UNRWA programs for refugees
are more strategic and focused and an agency culture of accountability.
[31] [hyperlink, http://www.gao.gov/products/GAO-04-276R].
[32] Under a UN policy, UNRWA officials said they do not screen
contractors against donor country lists.
[33] UNRWA also reported that, in accordance with UN policy, it uses
the UN Suspended/Removed Vendor Report, which identifies those vendors
confirmed to be doing business in an unethical or corrupt manner, to
screen contractors.
[34] We did not independently review the results of UNRWA's Department
of Internal Oversight Services' internal audits because, under a
current UNRWA policy, donor governments and respective agencies do not
have access to the results of internal agency audits.
[35] The Special Hardship Assistance Program is an UNRWA Relief and
Social Services program, which is comprised of food assistance and a
cash subsidy for food of up to $40 per year per family member. This
program is intended to provide a cushion of support to refugees in
distress who are unable to earn a living because of a particularly
difficult family situation, ensure minimum standards of nutrition and
shelter, and intervene with cash grants in case of exceptional family
difficulties.
[36] Under the UN Financial Regulations and Rules, the General Assembly
appoints a Board of Auditors to perform the audit of the accounts of
the UN and its funds and programs. The board is independent and solely
responsible for the conduct of the audit, and it audits UNRWA's
financial statements every 2 years. This board consists of three
members, each of whom shall be the Auditor-General (or officer holding
the equivalent title) of a member state.
[37] GAO, Department of State (State) and United Nations Relief and
Works Agency (UNRWA) Actions to Implement Section 301(c) of the Foreign
Assistance Act of 1961, [hyperlink,
http://www.gao.gov/products/GAO-04-276R] (Washington, D.C.: Nov. 17,
2003).
[38] State said it does not currently limit its contributions to
UNRWA's General Fund to specific purposes, but all U.S. contributions
to UNRWA's Emergency Appeal for West Bank and Gaza are limited so that
no U.S. funds are to be used for UNRWA's emergency cash assistance
activities in West Bank and Gaza.
[39] The UN Administrative Tribunal Statute and Rules established the
tribunal to hear and pass judgment on applications alleging non-
observance of a staff member's contract or terms of appointment. An
application is receivable before the UN Administrative Tribunal once
the person concerned has taken the case to a joint appeals body that
has communicated its opinion to the Secretary-General or in a case
where the Secretary-General and the staff member concerned agree to
submit applications directly to the tribunal.
[End of section]
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