prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: Many Members of Congress became actively engaged in foreign policy debates over U S  intervention in the 1992-1995 war in Bosnia and Herzegovina (hereafter, "Bosnia")  Congress monitored and at times challenged the Bush and Clinton Administrations' response to the conflict through numerous hearings, resolutions, and legislative initiatives  Many observers contend that the United States is a stakeholder in Bosnia's future because of the strong impact of U S  intervention on the postwar Bosnian state  Nearly 25 years after warring parties in Bosnia reached the Dayton Agreement (see below), Bosnia faces numerous internal and external challenges, and the country retains geopolitical importance to U S  interests in the Western Balkans  As Congress assesses ongoing and emerging security issues in the region, including resilience against malign external influence, renewed conflict, and radicalization, Bosnia's internal politics and its role in Balkan stability may merit further examination  Bosnia has existed in various forms throughout its history: a medieval kingdom, territory held by two major empires, a federal unit, and, since 1992, an independent state  Bosnia's present international borders are largely consistent with its administrative boundaries under later periods of Ottoman Turkish rule  After World War I, Bosnia became part of the newly created Kingdom of Serbs, Croats, and Slovenes  It was one of the six constituent republics of the Socialist Federal Republic of Yugoslavia from 1945 until 1992  Bosnia's constitution stems from the U S -brokered Dayton Peace Agreement that ended the country's 1992-1995 war  It recognizes three "constituent peoples": Bosniaks, Croats, and Serbs  All three groups are Slavic  Religious tradition is considered a marker of difference among the three ethnic identities: Bosniaks are predominantly Muslim, Serbs are largely Orthodox Christian, and Croats are mostly Catholic  Although Bosnian, Croatian, and Serbian are recognized in Bosnia as distinct official languages, they are mutually intelligible  Bosniaks comprise approximately 50 1% of the population, Bosnian Serbs 30 8%, and Bosnian Croats 15 4%  In this report, Bosnian is used as a non-ethnic term for a person or institution from Bosnia  A Bosnian Serb is an ethnic Serb from Bosnia and a Bosnian Croat is an ethnic Croat from Bosnia  Bosniak refers to Slavic Muslims  Bosnia's religious and cultural diversity is one of its distinctive characteristics  Islam was introduced to part of Bosnia's population during the Ottoman period, although there were also large Catholic, Orthodox Christian, and Jewish communities  Bosnia was the most heterogeneous Yugoslav republic and the only one where no ethnic group formed an absolute majority  During the 1990s, some popular accounts of Bosnia (and the former Yugoslavia) depicted its ethnic relations as "ancient hatreds," implying that the country's ethnic groups cannot peacefully coexist and that the 1992-1995 war was unavoidable  However, many experts on the region reject this thesis  Although Bosnia has experienced episodes of communal violence and bloodshed, most recently during World War II and the 1992-1995 war, its heterogeneous population also has lived in mixed communities for periods of peace  Many experts contend that ethnic conflict often was stoked by domestic leaders who manipulated historical memory and grievances to further their own agendas, or by external powers seeking to rule Bosnia or annex its territory  In the 1980s, Yugoslavia's escalating political and economic crises fueled nationalist movements  Nationalist leaders in Serbia and Croatia appealed to Bosnian Serbs and Croats as ethnic "kin " The party that ruled Croatia for most of the 1990s, the Croatian Democratic Union (HDZ), established a sister party with the same name to mobilize Bosnian Croats and compete in Bosnia's elections  This gave Croatia an avenue of influence in Bosnian politics  Serbia, led by strongman Slobodan Milošević, likewise had influence over Bosnian Serb leaders  In Bosnia's November 1990 elections—the first competitive elections in decades—voters cast aside the ruling League of Communists party and elected ethnic parties that largely continue to dominate today  Bosnian voters backed independence in a 1992 referendum, following in the footsteps of Slovenia, Croatia, and Macedonia  Bosnian Serbs, who did not want to separate from Yugoslavia, boycotted the referendum  Bosnian Serb forces seized more than two-thirds of Bosnia's territory, and a three-year conflict followed that pitted Serb, Croat, and Bosniak forces against one another  Bosnian Serb leaders declared a "Serb Republic" ( Republika Srpska) in March 1992, while Bosnian Croat leaders proclaimed the Croat Community of Herceg-Bosnia in July  Some Bosnian Croat and Bosnian Serb leaders advocated unification with Croatia and Serbia, respectively, where government factions—including their strongman leaders—likewise wanted to carve a Greater Croatia and Greater Serbia out of Bosnia's territory  Bosniak leaders opposed dismemberment of the state  Bosnia's war was one of the most lethal conflicts in Europe since World War II  Bosnian Serb forces besieged Sarajevo for 44 months  More than 10,000 people, mostly civilians, died due to shelling, sniping, and blockade-related deprivation  Paramilitary factions from neighboring Croatia and Serbia—some of which reportedly had ties to the Croatian and Serbian government—fought alongside Bosnian Croats and Serbs  The Serb-dominated Yugoslav National Army also aided Bosnian Serb forces, giving them a military advantage  In many areas, combatants from the three groups killed or expelled members of other ethnic groups to "purify" territory that they wanted to claim as their own  This "ethnic cleansing" changed Bosnia's demographic landscape  An estimated 100,000 or more Bosnians were killed in the conflict, and roughly half of its population displaced  In addition, an estimated 20,000 or more women and girls were victims of sexual violence  Hundreds of Bosnians have been prosecuted for war crimes at the International Criminal Tribunal for the former Yugoslavia (ICTY) and in Bosnian courts  In 2016, the ICTY convicted wartime Bosnian Serb leader Radovan Karadžić of genocide and war crimes  In 2019, the tribunal rejected his appeal and increased his sentence from 40 years to life  Citizens of Croatia and Serbia have also been indicted for crimes committed in the Bosnian war  Highly publicized incidents in 1994 and 1995 underscored the war's human toll  Bosnian Serb forces bombarded a Sarajevo market in 1994 and 1995, resulting in over 100 civilian deaths  In July 1995, Serb forces commanded by Ratko Mladić seized and executed more than 8,000 Bosniak men and boys in a U N -designated safe area around the city of Srebrenica, an incident subsequently seen by some as a consequence of the international community's muddled, ineffectual response to the conflict  The International Court of Justice and ICTY subsequently ruled that the Srebrenica massacres constituted an act of genocide  Mladić was convicted of genocide and other crimes in 2017  These incidents increased pressure on U S  policymakers to take a stronger role in resolving a conflict that had largely been left to the EU and the United Nations  Under U S  command, NATO intervened in August and September 1995 with air strikes against Bosnian Serb targets, while allied Bosniak and Croat forces launched a simultaneous offensive in western Bosnia  The United States played a key role in brokering several agreements  The 1994 Washington Agreement ended the "war within a war" between Bosniaks and Croats  In November 1995, leaders from Croatia, Bosnia, and Serbia met at the Wright-Patterson Air Force base in Dayton, OH, to negotiate a peace agreement  U S  diplomat Richard Holbrooke played a crucial role in brokering the General Framework Agreement for Peace in Bosnia and Herzegovina, more commonly known as the Dayton Peace Agreement  Bosnia's complex political system is a product of the Dayton Agreement; one of its annexes serves as Bosnia's constitution (Annex 4)  Its provisions partly reflect the situation on the ground in 1995, including the subdivision of Bosnia into two ethnoterritorial entities ( Figure 1 ): Republika Srpska ("RS"), which Bosnian Serb leaders had proclaimed in 1992, and the Federation of Bosnia and Herzegovina ("FBiH," predominantly populated by Bosniaks and Croats), which was created by the 1994 Washington Agreement  Entity borders were largely drawn to form ethnic majorities, even though they also reflected territorial seizure and ethnic cleansing  Many Bosniaks view the division of Bosnia into these roughly equal entities as awarding the spoils of war to Bosnian Serbs, whom they regard as the aggressors  Many Bosnian Serbs, however, view the Serb-majority entity as a protection against marginalization  The designation of Bosniaks, Croats, and Serbs as Bosnia's three "constituent peoples" is a cornerstone of the Dayton system  Numerous government bodies have ethnic quotas requiring equal representation of the three groups  In these power-sharing institutions, delegates from each constituent group may veto measures that go against vital ethnic interests  While these arrangements make Bosnia's political system prone to gridlock, Dayton's negotiators viewed them as necessary to prevent any group from feeling marginalized in a context of low trust  Bosnia is a parliamentary republic with a high degree of decentralization  Its complex, tiered structure includes a central ("state-level") government, the two entities, the autonomous Brčko district, and cantonal and municipal governments  The central ("state-level") government covers the entirety of Bosnia  A three-member presidency is the head of state, and includes one Serb member who is elected by RS voters, and one Bosniak and one Croat member elected by FBiH voters  The Council of Ministers, led by a Chairperson, is roughly equivalent to a cabinet government and prime minister in other parliamentary systems  The Parliamentary Assembly is a state-level legislature with two chambers: a directly elected House of Representatives (42 members) and an indirectly elected House of Peoples (5 Serbs, 5 Croats, and 5 Bosniaks)  The state-level government is considered to be weak, despite some expansion of its functions in the 2000s  Its major responsibilities include foreign relations; trade, customs, and monetary policy; migration and asylum policy; defense; and intelligence  Bosnia is further subdivided into two ethnoterritorial entities: Republika Srpska (RS), where Serbs are the largest ethnic group (82%), and the Federation entity (FBiH), where Bosniaks (70%) and Croats (22%) are the largest groups  The two entities have broader policy jurisdiction than the state-level government  Governing functions that are not assigned to the state-level government fall to the entities  These include civilian policing, economic policy, fiscal policy, energy policy, and health and social policy, as well as other issues  Each entity has its own constitution, as well as a president, vice presidents, legislature, and cabinet government with a prime minister  Each entity may establish "special parallel relationships" with neighboring states (i e , Croatia and Serbia)  Numerous entity bodies also incorporate ethnic quotas  Brčko district, a border region in northeastern Bosnia, was initially administered by the international community to allay concerns about RS secession  Brčko's location interrupts RS's contiguity, and both entities initially claimed it  Brčko was later awarded to both entities, but remains a self-governing district whose population is a mix of all three constituent peoples  Some analysts believe it has been relatively more successful than the entities in passing reforms and reintegrating its divided population (e g , ethnically mixed schools with a common curriculum)  FBiH entity is further divided into ten cantons, many of which were drawn to form ethnic Bosniak or Croat majorities  The cantons have jurisdiction in many policy areas, including policing, housing, culture, and education  They also have their own constitutions—based on the FBiH constitution—as well as legislatures and cabinet-style governments  FBiH and RS are further divided into 79 and 64 municipalities, respectively  The Dayton Agreement established a strong oversight role for the international community  The Office of the High Representative (OHR) was created to monitor the implementation of civilian aspects of Dayton  The High Representative is supported by the Peace Implementation Council (PIC), a group of 55 countries and agencies  A 1997 PIC conference empowered the High Representative to impose binding decisions and sanction politicians who obstruct Dayton  Until the mid-2000s, the High Representative used these powers to remove officials deemed to be obstructive to peace and to promote what are considered among the most constructive reforms since Dayton, including merging the entities' armed forces and intelligence services and putting them under new state-level ministries  However, the High Representative's proactive role has since decreased  This is partly due to criticism that the OHR lacks democratic legitimacy and accountability  Bosnian Serb politicians have claimed that the OHR's interventions support Bosniak leaders' preference for a more centralized state  At the same time, some U S  and EU policymakers believed that the attraction of EU membership could incentivize reforms in place of the OHR's more top-down approach  The international community also plays an ongoing security role  NATO led the Implementation Force (IFOR) and the smaller Stabilization Force (SFOR) that monitored security aspects of the Dayton Peace Agreement  The initial deployment of NATO ground forces to Bosnia numbered nearly 60,000, of which the largest share (approximately one-third) was from the United States  The number of troops subsequently decreased  In 2004, NATO's peacekeeping role was transferred to the EU with the understanding that NATO would assist if necessary  The size of the EU operation (EUFOR Althea) decreased from 7,000 troops in 2004 to roughly 600 troops today  Many analysts contend that the Dayton Agreement helped hold Bosnia together after the war; they point to the absence of widespread violence since 1995 as an indicator of its success  However, observers also question whether Bosnia can function much longer under the Dayton system  They identify several key challenges: Critics claim that Bosnia's political system reinforces the country's ethnic divisions and makes ethnicity a core basis of political identity  The ethnic parties that have dominated politics since the war generally appeal to voters from their respective ethnic communities rather than all Bosnians  Critics accuse ethnic party leaders of inflaming nationalist tensions and manipulating historical memory to distract from corruption and win elections, thus aggravating rather than bridging the deep wounds that remain from the war  In some parts of Bosnia, divisions are further reproduced at the societal level through institutions like segregated schools, which separate schoolchildren from different ethnic groups and teach them different curriculum  Some analysts also contend that the system is too gridlock-prone to pass major political and economic reforms to be passed, even with the incentive of potential EU membership  Bosnia's fractured, overlapping institutions sometimes muddle policymaking jurisdiction and impede coordinated response  Furthermore, power-sharing arrangements create numerous veto points in the legislative process  Government coalitions are typically ideologically broad and unwieldy, creating a further source of potential dysfunction  One of the consequences of these barriers is that it is difficult to pass legislation  The previous state-level Parliament, for example, adopted twelve new laws over the course of its 2014-2018 term  Corruption in Bosnia has roots in the country's wartime economy  A 2000 Government Accountability Office (GAO) report stated that "organized crime and corruption pervade Bosnia's national political parties, civil service, law enforcement and judicial systems  [Ethnic] parties control all aspects of the government, the judiciary, and the economy, and in so doing maintain the personal and financial power of their members " Many observers claim that the situation has improved little since then  In 2018, the High Representative warned that the rule of law has deteriorated, while the U S  State Department describes the rule of law as "an existential issue " Bosnia's major parties allegedly siphon from the state apparatus and public enterprises in their strongholds to amass wealth and power  Furthermore, parties in power reportedly politicize hiring in Bosnia's public sector, which employs an estimated third or more of the working population  For many Bosnians, satisfactory employment depends on having the right political connections, which creates a dependence that reportedly is exploited during elections  In 2018, the outgoing U S  ambassador to Bosnia decried the "[Bosnian] politicians who seek to destabilize the country in order to remain in power at all costs for personal profit and protection " Many analysts believe that Bosnia's entrenched ethnic parties benefit tremendously from the status quo and have little incentive to reform the system  Bosnia's MPs are among the best-paid in Europe relative to local incomes, commanding six to eight times the average Bosnian salary  Parties and politicians who gain office in the government or administration often find "a remarkably efficient path to personal enrichment " Politicians are skilled at using veto points to block legislation that threatens their position in Bosnia's patronage system  According to one analyst, Bosnia's patronage system is "the raison d'etre of the political elites and is the main cause of the state's dysfunctionality and resistance to reform " Bosnia's entrenched political class may also fear penalty if serious reforms are enacted and shine the spotlight on malfeasance  Criminal indictments against leaders in neighborhood countries like Romania, Croatia, and North Macedonia highlight this risk  Analysts believe these disincentives make entrenched politicians resistant to external pressure for reform  Several major rounds of U S - and EU-brokered constitutional reform efforts, including in 2006, 2008, and 2009, ultimately failed  Germany and the United Kingdom launched a major initiative in 2014 to shift the focus from difficult constitutional reforms to seemingly more feasible socioeconomic reforms that they hoped would improve Bosnia's economy and dismantle patronage networks  The 2015 "Reform Agenda" identified economic, administrative, and legal measures to be adopted by entity- and state-level governments  The process, which required the major parties to commit in writing to the reform framework, was supported by the EU, the International Monetary Fund, the World Bank Group, and the United States  As an incentive for politicians to agree to the Agenda, the EU offered the entry into force of Bosnia's long-stalled Stabilization and Association Agreement, which marked the first step toward EU membership  However, most observers view the Reform Agenda as largely unsuccessful; many of its provisions failed when entrenched parties objected to measures that would undercut their dominance  While many officials recognize that Bosnia's political system needs reform, there is little consensus on how to change it or to generate the political will to find common ground so long as the dominant parties remain entrenched  Bosnian Serb leaders have expressed a desire to return to the "original" Dayton system, when the entities had greater competencies in security and justice  Milorad Dodik, who has dominated politics in Republika Srpska since the 2000s, has gone further by repeatedly threatening RS secession  Bosnian Croat leaders from the largest Croat party, the Croatian Democratic Union of Bosnia (HDZ-BiH), call for more autonomy for Croats, and have raised the prospect of splitting FBiH to create a third Croat-majority entity  By contrast, Bosniak leaders generally prefer more centralization and the removal of some of the institutional arrangements that they believe contribute to dysfunction and gridlock  Some Bosniak officials also have proposed dismantling the entities or eliminating FBiH's cantons  Survey research documents Bosnian citizens' anger toward the political class and their distrust of political institutions  In a 2018 International Republican Institute survey, 86% of respondents expressed belief that Bosnia is heading in the wrong direction  An estimated 170,000 individuals—disproportionately young and skilled—have emigrated since 2013  Dissatisfaction with education and healthcare, insecurity, and nepotism are cited as key motives to emigrate  Nevertheless, some analysts believe that periods of social discontent in 2014 and 2018, which challenged the system but appeared to transcend ethnic divides, suggest that strengthening Bosnian civil society could increase pressure for reform, and perhaps cultivate a new generation of party leaders  Other observers have put their hopes for reform in Bosnia's so-called "civic parties," which do not have nationalist platforms and typically mobilize voters on the basis of socioeconomic interests rather than ethnicity  While these parties have not matched the results of the ethnic parties, their electoral performance has improved in recent years  Bosnia's challenges came to the forefront during its most recent general election on October 7, 2018 (see Table 1 )  The Central Election Commission (CEC) registered 60 parties and over 3,500 candidates for state-level, entity, and cantonal offices  Observers noted that the campaign climate was more divisive and nationalist in tone than usual  Despite broad voter dissatisfaction, entrenched ethnic parties won the largest vote shares  Almost six months after the election, the parties are still negotiating over government formation at the state level and in FBiH; however, it appears that entrenched ethnic parties will continue to dominate  In March 2019, the leaders of the largest Bosniak, Croat, and Serb parties stated that they had agreed to a set of principles to guide forming the state-level government (the Council of Ministers)  Some observers viewed the improved result of civic parties (one-third of the vote in FBiH) as a positive development  Some of the most controversial outcomes concern the elections to the state-level presidency, composed of three members (one Bosniak, one Croat, and one Serb)  In a closely fought race, Šefik Džaferović, candidate of the ethnic Bosniak SDA party, narrowly defeated the candidate of the civic SDP party (36 6% and 33 5%, respectively), retaining the lock that the SDA has had on the Bosniak seat in most elections since 1996, but perhaps auguring a future victory by a civic party candidate  Prior to the election, some analysts expressed concern at the prospect of two of the three seats on the presidency being held by the nationalist Bosnian Serb leader Milorad Dodik and his ally, the nationalist Bosnian Croat politician Dragan Čović  Both politicians have explicitly or implicitly challenged the legitimacy of Bosnian statehood and called for greater ethnoterritorial autonomy  However, to the surprise of some observers, Željko Komšić of the civic Democratic Front defeated incumbent Čović for the Croat seat with 53% of the vote  Komšić was previously elected as the Croat member of the presidency in 2006 and 2010, and is considered to be a moderate political figure who generally supports centralizing reforms  In contrast to HDZ-BiH leader Čović, he does not have strong ties to the Croatian government  Komšić's election as the Croat member of the presidency in 2006 and 2010 was mired in controversy amid complaints that he only won with the support of Bosniaks who voted in the election for the Croat member on the presidency rather than the Bosniak member  Komšić identifies as Croat but has been leader of several civic parties  He comes from central Bosnia, and not from the Croat-majority western regions that are the stronghold of the HDZ  Although it is not illegal for Bosniaks to vote for the Croat seat on the presidency rather than the Bosniak seat, some Croat leaders (especially HDZ-BiH and HDZ-1990) claim that it violates the spirit of Dayton and results in illegitimate representation of Croats  Similar accusations of ethnic cross-voting surfaced after Komšić's victory in 2018  Some analysts expect Komšić's victory to harden the HDZ-BiH position on electoral reform (see "Legal Challenges," above) and possibly embolden politicians who seek a separate entity  As most pre-election polls anticipated, RS strongman Milorad Dodik defeated the more moderate incumbent Serb member of the presidency with 54% of the vote  Dodik has dominated entity politics in RS since the mid-2000s as entity prime minister and president  Analysts note that RS's political environment grew more closed as Dodik consolidated power  Dodik has run afoul of the United States and the EU by frequently threatening to hold a referendum on RS secession, questioning the legitimacy of Bosnian statehood, and cultivating close ties to Russia (see below)  The U S  Treasury Department sanctioned him in 2017 for actively obstructing Dayton  Many analysts have expressed concern that Dodik will use his new position to obstruct the workings of the central government while continuing to dictate politics in RS through loyal allies  Shortly after the election he vowed to "work above all and only for the interests of Serbs " One of his first acts as head of state was to call for Bosnia to recognize Ukraine's Crimea region as Russian territory  In December 2018, the National Assembly of RS approved the creation of several new ministries, an act that some view as an attempt to wrest competencies from the state-level government  In early 2019, the RS parliament courted controversy when it passed legislation to create a new commission to reinvestigate the events of Srebrenica, which many view as an attempt to deny or downplay the massacres  Since the election, the formation of governments has proceeded piecemeal, and legal challenges to election law in FBiH (see above, "Legal Challenges") initially cast doubt over the formation of that entity's government  The RS National Assembly approved the new entity government in December 2018  Party leaders continue to negotiate over forming governments in FBiH and the state-level Council of Ministers  Because the FBiH government did not fix electoral legislation before the election, the Electoral Commission adopted a decision to assign delegates to the House of Peoples based on the 2013 census  (The Electoral Commission's actions reportedly came amid strong pressure from U S  and EU officials)  Several Bosniak parties challenged the decision before the Constitutional Court; however, the Court declined to take on the case  Bosnia is one of Europe's poorest countries  The 1992-1995 war caused an estimated $110 billion in damage, and Bosnia's economy contracted to one-eighth of its prewar level  Despite significant reconstruction and recovery since 1995, GDP per capita was $5,148 in 2017, well below the EU average ($33,715) and that of Bulgaria ($8,031), its lowest-ranking member  Nearly one in five Bosnians lives below the poverty level  Bosnia's unemployment rate was 18% in 2018, down from 28% in 2015  Youth unemployment also declined in recent years from 60% to 46%  Nevertheless, these rates are still high by European standards  Since 2015, annual GDP growth has averaged around 3%, but it is largely driven by consumption (much of which in turn is fueled by migrant remittances)  The IMF has urged Bosnia to privatize or restructure the nearly 550 state-owned enterprises that comprise roughly 20% of its economy; many of them are unprofitable but allegedly are used by politicians as "cash cows and workplaces for loyal cadres " Bosnia participates in several free trade schemes  In 2006, it joined the Central European Free Trade Agreement (CEFTA) alongside other non-EU countries in the region, including other ex-Yugoslav neighbors  Bosnia's Stabilization and Association Agreement (SAA) with the European Union, which entered into force in 2015, provides for almost fully free trade  A free trade agreement with the European Free Trade Association (EFTA) also entered into force in 2015  The EU is Bosnia's primary trade partner  Germany, Italy, Croatia, Slovenia, and Austria are Bosnia's key EU export markets, accounting for more than half of its exports in 2017
Report 2:  Also, the SBA spent $36 9 million on lender oversight, including oversight of 7(a) lenders  The SBA anticipated that 7(a) program administrative expenses will be about $82 2 million in FY2018 and $84 5 million in FY2019  In addition, the SBA anticipated that it will spend about $36 9 million in FY2018 and $36 6 million in FY2019 for lender oversight of the SBA's various lending programs  In FY2017, borrowers used 7(a) loan proceeds to purchase land or make land improvements (26 62%); purchase a business (17 06%); finance working capital (15 59%); pay off loans, accounts payable or notes payable (13 23%); construct new buildings (6 06%); purchase equipment (5 76%); make leasehold improvements (3 25%); expand or renovate current buildings (2 39%); refinance existing debt (1 40%); and cover other expenses (8 64%)  In 2008, the Urban Institute released the results of an SBA-commissioned study of the SBA's loan guaranty programs  As part of its analysis, the Urban Institute surveyed a random sample of SBA loan guaranty borrowers  The survey indicated that most of the 7(a) borrowers responding to the survey rated their overall satisfaction with their 7(a) loan and loan terms as either excellent (18%) or good (50%)  One out of every five 7(a) borrowers (20%) rated their overall satisfaction with their 7(a) loan and loan terms as fair, and 6% rated their overall satisfaction with their 7(a) loan and loan terms as poor (7% reported don't know or did not respond)  In addition, 90% of the survey's respondents reported that the 7(a) loan was either very important (62%) or somewhat important (28%) to their business success (2% reported somewhat unimportant, 3% reported very unimportant, and 4% reported don't know or did not respond)  The Urban Institute found that about 9 9% of conventional small business loans are issued to minority-owned small businesses, and about 16% of conventional small business loans are issued to women-owned businesses  In FY2018, 32 8% of 7(a) loan approvals ($8 32 billion of $25 37 billion) were to minority-owned businesses (23 0% Asian, 6 0% Hispanic, 3 1% African-American, and 0 7% American Indian) and 13 6% ($3 46 billion of $25 37 billion) were to women-owned businesses  From its comparative analysis of conventional small business loans and the SBA's loan guaranty programs, the Urban Institute concluded the following: SBA's loan programs are designed to enable private lenders to make loans to creditworthy borrowers who would otherwise not be able to qualify for a loan  As a result, there should be differences in the types of borrowers and loan terms associated with SBA-guaranteed and conventional small business loans  Our comparative analysis shows such differences  Overall, loans under the 7(a) and 504 programs were more likely to be made to minority-owned, women-owned, and start-up businesses (firms that have historically faced capital gaps) as compared to conventional small business loans  Moreover, the average amounts for loans made under the 7(a) and 504 programs to these types of firms were substantially greater than conventional small business loans to such firms  These findings suggest that the 7(a) and 504 programs are being used by lenders in a manner that is consistent with SBA's objective of making credit available to firms that face a capital opportunity gap  Congressional interest in the 7(a) loan program has increased in recent years largely because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to assist in the economic recovery  During the 110 th and 111 th Congresses, several laws were enacted to increase the supply and demand for capital for both large and small businesses  For example, in 2008, Congress adopted P L  110-343 , the Emergency Economic Stabilization Act of 2008, which authorized the Troubled Asset Relief Program (TARP)  Under TARP, the U S  Department of the Treasury was authorized to purchase or insure up to $700 billion in troubled assets, including small business loans, from banks and other financial institutions  The law's intent was "to restore liquidity and stability to the financial system of the United States " P L  111-203 , the Dodd-Frank Wall Street Reform and Consumer Protection Act, reduced total TARP purchase authority from $700 billion to $475 billion  The Department of the Treasury's authority to make new financial commitments under TARP ended on October 3, 2010  The Department of the Treasury has disbursed approximately $430 billion in TARP funds, including $370 million to purchase SBA 7(a) loan guaranty program securities  In addition, as mentioned previously, in 2009, ARRA provided an additional $730 million for SBA programs, including $375 million to temporarily reduce fees in the SBA's 7(a) and 504/CDC loan guaranty programs and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans  Congress subsequently provided another $265 million, and authorized the SBA to reprogram another $40 million, to extend the fee reductions and loan modification through May 31, 2010, and the Small Business Jobs Act of 2010 provided another $505 million (plus $5 million for administrative expenses) to extend the fee reductions and loan modification from September 27, 2010, through December 31, 2010  Also, P L  111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the use of any funding remaining from the Small Business Jobs Act of 2010 to extend the fee subsidies and 90% maximum loan guaranty percentage through March 4, 2011, or until the available funding was exhausted  Funding for these purposes was exhausted on January 3, 2011  The Obama Administration argued that TARP and the additional funding for the SBA's loan guaranty programs helped to improve the small business lending environment and supported "the retention and creation of hundreds of thousands of jobs " Critics argued that small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint are the best means to assist small business economic growth and job creation  Over the years, the SBA's Office of Inspector General (OIG) and the U S  Government Accountability Office (GAO) have independently reviewed the SBA's administration of the SBA's loan guaranty programs  Although improvements have been noted, both agencies have reported deficiencies in the SBA's administration of its loan guaranty programs that they argue need to be addressed, including issues involving the oversight of 7(a) lenders and the lack of outcome-based performance measures  On December 1, 2000, the OIG released its FY2001 list of the most serious management challenges facing the SBA and included, for the first time, the oversight of SBA lenders  Since then, the OIG has determined that the SBA has made significant progress in improving its oversight of SBA lenders  For example The SBA established an Office of Lender Oversight (renamed the Office of Credit Risk Management in 2007), led by an Associate Administrator, which, in October 2000, drafted a strategic plan to serve as a basis for developing a Standard Operating Procedure (SOP) for lender oversight and, among other activities, initiated "steps to develop and implement a comprehensive loan monitoring system to evaluate lender performance  The system will collect data on lenders such as delinquency default rates, liquidations, loan payments, and loan originations " In 2004, the SBA's National Guaranty Purchase Center developed a quality control plan "to review the quality of the guaranty purchase process " In 2006, the SBA issued an SOP that established procedures for on-site, risk-based lender reviews and safety and soundness examinations for 7(a) lenders and Certified Development Companies (CDCs) participating the SBA's 504/CDC loan guaranty program  In 2007, the SBA completed the centralization of all 7(a) loan processing activities and, with very limited exception, ended loan making, servicing, liquidation, and guaranty purchase activity at district offices  In 2008, the SBA issued an SOP for 7(a) lender oversight which included uniform policies and procedures for the evaluation of lender performance and the SBA's Office of Financial Program Operations (OFPO) began designing "a comprehensive quality control program across all of its centers " Previously, quality control was conducted within each loan center (Standard 7(a) Loan Guaranty Processing Center, Commercial Loan Service Center, and National Guaranty Purchase Center) "at various levels of sophistication " The SBA issued an interim final rule in the Federal Register on December 1, 2008, incorporating the SBA's risk-based lender oversight program into the SBA's regulations  In 2010, the SBA's OFPO established its agency-wide quality control program, which is designed to improve service and "reduce waste, fraud, and abuse" by ensuring "that centers accurately and consistently apply statutory, regulatory, and procedural loan program requirements " The SBA also developed a "risk-based, off-site analysis of lending partners through its Loan/Lender Monitoring System (L/LMS), a state-of-the-art portfolio monitoring system that incorporates credit scoring metrics for portfolio management purposes " In 2012-2013, the SBA "(1) developed risk profiles and lender performance thresholds, (2) developed a select analytical review process to allow for virtual risk-based reviews, (3) updated its lender risk rating model to better stratify and predict risk, and (4) conducted test reviews under the new risk-based review protocol " In 2013-2014, the SBA "improved its monitoring and verification of corrective actions by lenders by: (1) developing corrective action assessment procedures, (2) finalizing a system to facilitate the corrective action process, and (3) populating the system with lender oversight results requiring corrective action " In 2015, the SBA's Office of Credit Risk Management (OCRM) "engaged contractor support to expand on its corrective action follow-up process  Additionally, OCRM issued its FY2015 Risk Management Oversight Plan, which included plans to conduct 170 corrective action reviews between 7(a) and 504 lenders " In 2016, OCRM reported that it conducted 147 corrective action follow-up assessments, established performance measures and risk mitigation goals for the SBA's entire lending portfolio, and "conducted portfolio analyses of problem lenders with heavy concentrations in SBA 7(a) lending and sales on the secondary market " Despite these improvements, the OIG continues to list lender oversight as one of the most serious management challenges facing the SBA because it argues that several issues that it has identified in audits have not been fully addressed  Specifically, the OIG reports that the SBA needs to show that the portfolio risk management program is used to support risk based decisions, implement additional controls to mitigate risks, develop an effective method for tracking loan agents, and update regulations on loan agents  GAO has argued that the 7(a) program's performance measures (e g , number of loans approved, loans funded, and firms assisted across the subgroups of small businesses) provide limited information about the impact of the loans on participating small businesses: The program's performance measures focus on indicators that are primarily output measures–for instance, they report on the number of loans approved and funded  But none of the measures looks at how well firms do after receiving 7(a) loans, so no information is available on outcomes  As a result, the current measures do not indicate how well the agency is meeting its strategic goal of helping small businesses succeed  The SBA's OIG has made a similar argument concerning the SBA's Microloan program's performance measures  Because the SBA uses similar program performance measures for its Microloan and 7(a) programs, the OIG's recommendations could also be applied to the SBA's 7(a) program  Specifically, as part of its audit of the SBA Microloan program's use of ARRA funds, the OIG found that the SBA's performance measures for the Microloan program are based on the number of microloans funded, the number of small businesses assisted, and program's loan loss rate  It argued that these "performance metrics     do not ensure the ultimate program beneficiaries, the microloan borrowers, are truly assisted by the program" and "without appropriate metrics, SBA cannot ensure the Microloan program is meeting policy goals " It noted that the SBA does not track the number of microloan borrowers who remain in business after receiving a microloan to measure the extent to which the loans contributed to the success of borrowers and does not determine the effect that technical training assistance may have on the success of microloan borrowers and their ability to repay loans  It recommended that the SBA "develop additional performance metrics to measure the program's achievement in assisting microloan borrowers in establishing and maintaining successful small businesses " In its response to GAO's recommendation to develop additional performance measures for the 7(a) program, the SBA formed, in July 2014, an impact evaluation working group to develop a methodology for conducting impact evaluations of the agency's programs using administrative data sources residing at the SBA and in other federal agencies, such as the U S  Census Bureau and the Bureau of Labor Statistics  Numerous SBA program offices participated in this working group and each office developed its own program evaluation methodology or established program evaluation frameworks  More recently, the SBA indicated in its FY2017 congressional budget justification document that although it "continues to face barriers gathering outcome rich evaluation data with current restrictions in collecting personal identification information (PII) and business identification information (BII)" it "plans to further develop its analytical capabilities, enhance collaboration across its programs, provide evaluation-specific trainings, and broaden use of impact evaluations to support senior leaders and institutionalize the evidence-based process across programs " To encourage evidence-based evaluations across its programs, the SBA has created an annual Enterprise Learning Agenda designed to "help program managers continue to build and use evidence and to foster an environment of continuous learning " As part of this agenda building process, the SBA identifies programs for evidence-based evaluation and undertakes both internal evaluations using available data or contracts with third parties to conduct the evaluations  Congress authorized several changes to the 7(a) program during the 111 th Congress in an effort to increase the number and amount of 7(a) loans  During the 111 th Congress, the Obama Administration supported congressional efforts to temporarily subsidize fees for the 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90%  Congress subsequently provided nearly $1 1 billion to temporarily subsidize fees for the 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage to 90% for all standard 7(a) loans  The Obama Administration also proposed the following modifications to several SBA programs, including the 7(a) program: increase the maximum loan size for 7(a) loans from $2 million to $5 million; increase the maximum loan size for the 504/CDC program from $2 million to $5 million for regular projects and from $4 million to $5 5 million for manufacturing projects; increase the maximum loan size for microloans to small business concerns from $35,000 to $50,000; increase the maximum loan limits for lenders in their first year of participation in the Microloan program, from $750,000 to $1 million, and from $3 5 million to $5 million in the subsequent years; temporarily increase the cap on SBAExpress loans from $350,000 to $1 million; and temporarily allow in FY2010 and FY2011, with an option to extend into FY2012, the refinancing of loans for owner-occupied commercial real estate that are within one year of maturity under the SBA's 504/CDC program  The Obama Administration argued that increasing the maximum loan limits for the 7(a), 504/CDC, Microloan, and SBAExpress programs would allow the SBA to "support larger projects," which would "allow the SBA to help America's small businesses drive long-term economic growth and the creation of jobs in communities across the country " The Administration also argued that increasing the maximum loan limits for these programs would be "budget neutral" over the long run and "help improve the availability of smaller loans " Critics of the Obama Administration's proposals to increase the SBA's maximum loan limits argued that higher loan limits might increase the risk of defaults, resulting in higher guaranty fees or the need to provide the SBA additional funding, especially for the SBAExpress program, which has experienced somewhat higher default rates than other SBA loan guaranty programs  Others advocated a more modest increase in the maximum loan limits to ensure that the 7(a) program "remains focused on startup and early-stage small firms, businesses that have historically encountered the greatest difficulties in accessing credit," and "avoids making small borrowers carry a disproportionate share of the risk associated with larger loans " Others argued that creating a small business direct lending program within the SBA would reduce paperwork requirements and be more efficient in providing small businesses access to capital than modifying existing SBA programs that rely on private lenders to determine if they will issue the loans  Also, as mentioned previously, others argued that providing additional resources to the SBA or modifying the SBA's loan programs as a means to augment small business access to capital is ill-advised  In their view, the SBA has limited impact on small businesses' access to capital  They argued that the best means to assist small business economic growth and job creation is to focus on small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint  As mentioned previously, in 2009, ARRA provided an additional $730 million for SBA programs, including $375 million to temporarily reduce fees in the SBA's 7(a) and 504/CDC loan guaranty programs ($299 million) and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans ($76 million)  P L  111-240 provided $505 million (plus $5 million for administrative expenses) to extend the 7(a) program's 90% maximum loan guaranty percentage and 7(a) and 504/CDC loan guaranty programs' fee subsidies through December 31, 2010 (later extended to March 4, 2011), or until available funding was exhausted (which occurred on January 3, 2011)  The act also made the following changes to the SBA's programs: increased the maximum loan size for 7(a) loans from $2 million to $5 million; temporarily increased for one year (through September 27, 2011) the cap on SBAExpress loans from $350,000 to $1 million; increased the maximum loan size for the 504/CDC loans from $1 5 million to $5 million for regular projects, from $2 million to $5 million for projects meeting one of the program's specified public policy goals, and from $4 million to $5 5 million for manufacturers; increased the maximum loan size for the Microloan program from $35,000 to $50,000; authorized the SBA to establish an alternative size standard for the 7(a) and 504/CDC programs that uses maximum tangible net worth and average net income as an alternative to the use of industry standards and established an interim size standard of a maximum tangible net worth of not more than $15 million and an average net income after federal taxes (excluding any carryover losses) for the preceding two fiscal years of not more than $5 million; and allowed 504/CDC loans to be used to refinance up to $7 5 billion in short-term commercial real estate debt each fiscal year for two years after enactment (through September 27, 2012) into long-term fixed rate loans  The act also authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks to provide small business loans ($4 billion was issued), a $1 5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, and about $12 billion in tax relief for small businesses  It also contained revenue raising provisions to offset the act's cost and authorized a number of changes to other SBA loan and contracting programs  Congress did not approve any changes to the 7(a) program during the 112 th Congress  However, several bills were introduced during the 112 th Congress that would have changed the program  S  1828 , a bill to increase small business lending, and for other purposes, was introduced on November 8, 2011, and referred to the Senate Committee on Small Business and Entrepreneurship  The bill would have reinstated for a year following the date of its enactment the temporary fee subsidies for the 7(a) and 504/CDC loan guaranty programs and the 90% loan guaranty for standard 7(a) loans, which were originally authorized by ARRA and later extended by several laws, including the Small Business Jobs Act of 2010  H R  2936 , the Small Business Administration Express Loan Extension Act of 2011, introduced on September 15, 2011, and referred to the House Committee on Small Business, would have extended a one-year increase in the maximum loan amount for the SBAExpress program from $350,000 to $1 million for an additional year  The temporary increase in that program's maximum loan amount was authorized by P L  111-240 , the Small Business Jobs Act of 2010, and expired on September 27, 2011 (see Appendix )  S  532 , the Patriot Express Authorization Act of 2011, introduced on March 9, 2011, and referred to the Senate Committee on Small Business and Entrepreneurship, would have provided statutory authorization for the Patriot Express Pilot Program  This program was subsequently discontinued by the SBA on December 31, 2013  The bill would have increased the program's maximum loan amount from $500,000 to $1 million, and it would have increased the guaranty percentages from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to up to 85% of loans of $500,000 or less and up to 80% of loans exceeding $500,000  H R  2451 , the Strengthening Entrepreneurs' Economic Development Act of 2013, was introduced on June 20, 2013, and referred to the House Committee on Small Business  It would have authorized the SBA to make direct loans of up to $150,000 to businesses with fewer than 20 employees  It would have also required the SBA to assess, collect, and retain a fee with respect to the outstanding balance of the deferred participation share of each 7(a) loan in excess of $2 million that is no more than is necessary to reduce to zero the SBA's cost of making the loan  H R  2461 , the SBA Loan Paperwork Reduction Act of 2013, was introduced on June 20, 2013, and referred to the House Committee on Small Business  It would have provided statutory authorization for the Small Loan Advantage (SLA) pilot program  The SBA started that program on February 15, 2011  It provided a streamlined application process for 7(a) loans of up to $350,000 if the loan received an acceptable credit score from the SBA prior to the loan being submitted for processing  The SBA adopted the SLA application process as the model for processing all non-express 7(a) loans of $350,000 or less, effective January 1, 2014  As mentioned previously, the Obama Administration waived the up-front, one time loan guaranty fee and ongoing servicing fee for 7(a) loans of $150,000 or less approved in FY2014 (and later extended the fee waiver in FY2015 and FY2016)  H R  2462 , the Small Business Opportunity Acceleration Act of 2013, introduced on June 20, 2013, and referred to the House Committee on Small Business, would have made the fee waiver permanent  Also, the Obama Administration waived the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015 (called the Veterans Advantage Program)  S  2143 , the Veterans Entrepreneurship Act, would have authorized this fee waiver and made it permanent  Also, P L  113-235 provided statutory authorization to waive the 7(a) SBAExpress program's guarantee fee for veterans (and their spouse) in FY2015  P L  114-38 , the Veterans Entrepreneurship Act of 2015, authorized and made permanent the waiver of the up-front, one-time loan guaranty fee for veterans (and their spouse) in the SBAExpress program beginning on or after October 1, 2015, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero  The act also increased the 7(a) program's authorization limit from $18 75 billion in FY2015 to $23 5 billion  On June 25, 2015, the SBA informed Congress that the 7(a) program "is on track to hit its authorization ceiling of $18 75 billion well before the end of FY2015 " The SBA indicated that "our activity and trend analysis reveal a strong uptick that, if sustained, would exceed our lending authority ceiling by late August " If that were to occur, and in the absence of statutory authority to do otherwise, the SBA reported that it would have to suspend 7(a) loan making for the remainder of the fiscal year  The SBA requested an increase in the 7(a) loan program's authorization limit to $22 5 billion in FY2015  On July 23, 2015, citing "unprecedented demand," the SBA suspended 7(a) program lending  The SBA indicated that it would continue to process loan applications "up to the point of approval" and then place approved loans "into a queue awaiting the availability of program authority " Loans would be released "once program authority became available due to Congressional action or as a result of cancellations of loans previously approved this fiscal year " Applications would then "be funded in the order they were approved by SBA, with the exception that requests for increases to previously approved loans will be funded before applications for new loans " The SBA resumed 7(a) lending on July 28, 2015, following P L  114-38 's enactment  In addition to increasing the 7(a) program's authorization limit for FY2015, the act added requirements designed to ensure that SBA loans do not displace private sector loans (e g , the SBA Administrator may not guarantee a 7(a) loan if the lender determines that the borrower is unable to obtain credit elsewhere solely because the liquidity of the lender depends upon the guarantied portion of the loan being sold on the secondary market, or if the sole purpose for requesting the guarantee is to allow the lender to exceed the lender's legal lending limit), and requires the SBA to report, on a quarterly basis, specified 7(a) program statistics to the House and Senate Committees on Appropriations and Small Business  These required statistics are designed to inform the committees of the SBA's pace of 7(a) lending, provide estimates concerning the date on which the program's authorization limit may be reached, and present information concerning early defaults and actions taken by the SBA to combat early defaults  As mentioned previously, P L  114-113 increased the 7(a) program's authorization limit from $23 5 billion in FY2015 to $26 5 billion for FY2016  In addition, P L  114-223 , the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, authorized the SBA to use funds from its business loan program account "to accommodate increased demand for commitments for [7(a)] general business loans" for the duration of the continuing resolution (initially December 9, 2016, later extended by P L  114-254 , the Further Continuing and Security Assistance Appropriations Act, 2017, to April 28, 2017)  In a related development, S  2496 , the Help Small Businesses Access Affordable Credit Act, introduced on February 2, 2016, would have authorized the SBA Administrator, with prior approval of the House and Senate Committees on Appropriations, to make loans in an amount equal to not more than 110% of the 7(a) program's authorization limit if the demand for 7(a) loans should exceed that limit  The Obama Administration also requested authorization to allow the SBA Administrator to continue to issue loans should the demand for 7(a) loans exceed the program's authorization limit  Also  S  2992 , the Small Business Lending Oversight Act of 2016, would have required the Director of the SBA's Office of Credit Risk Management (OCRM) to impose penalties on 7(a) lenders who "knowingly and repeatedly" undertake specified activities; required the SBA to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; redefined the credit elsewhere requirement; authorized fees to be used to support OCRM operations; required the SBA to identify potential loan risks by lenders participating in the Preferred Lenders Program by requiring the SBA, at the end of each year, to "calculate the percentage of loans in a lender's portfolio made without a contribution of borrower equity when the loan's purpose was to establish a new small business concern, to effectuate a change of small business ownership, or to purchase real estate"; and, among other provisions, prohibited the SBA from approving any loan if its financing is more than 100% of project costs  Legislation was also introduced ( S  2125 , the Small Business Lending and Economic Inequality Reduction Act of 2015) to provide permanent, statutory authorization for the Community Advantage Pilot program (see Appendix )  The SBA announced on December 28, 2015, that it was extending the Community Advantage Pilot program through March 31, 2020  It had been set to expire on March 15, 2017  Recognizing that 7(a) loan approvals during the first half of FY2017 were about 9% higher than during the first half of FY2016, Congress included a provision in P L  115-31 , the Consolidated Appropriations Act, 2017, that increased the 7(a) program's authorization limit to $27 5 billion in FY2017 from $26 5 billion in FY2016  Congress also approved legislation ( P L  115-141 , the Consolidated Appropriations Act, 2018) that increased the 7(a) program's authorization limit to $29 0 billion in FY2018  In addition, as mentioned earlier, P L  115-189 , the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit  The SBA is required to provide at least 30 days' notice of its intent to exceed the 7(a) loan program's authorization limit to the House and Senate Committees on Small Business and the House and Senate Committees on Appropriations' Subcommittees on Financial Services and General Government and may exercise this option only once per fiscal year  Also, P L  115-232 , the John S  McCain National Defense Authorization Act for Fiscal Year 2019, included provisions to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives  The act authorizes the SBA to make "back-to-back" loans to ESOPs to better align with industry practices (the loan proceeds must only be used to make a loan to a qualified employee trust); clarifies that 7(a) loans to ESOPs may be made under the Preferred Lenders Program; allows the seller to remain involved as an officer, director, or key employee when the ESOP or cooperative has acquired 100% ownership of the small business; and authorizes the SBA to finance transition costs to employee ownership and waive any mandatory equity injection by the ESOP or cooperative to help finance the change of ownership  The act also directs the SBA to create outreach programs with Small Business Investment Companies and Microloan intermediaries to make their lending programs more accessible to all eligible ESOPs and cooperatives, an interagency working group to promote lending to ESOPs and cooperatives, and a Small Business Employee Ownership and Cooperatives Promotion Program, administered by Small Business Development Centers, to offer technical assistance and training to small businesses on the transition to employee ownership through cooperatives and ESOPs  Congress did not focus much attention on the Trump Administration's proposal in its FY2019 budget request to "introduce counter-cyclical policies in SBA's business guaranty loan programs and update certain fees structures to offset $155 million in business loan administration " As mentioned earlier, the proposal included raising $93 million in additional revenue by allowing the SBA to set the 7(a) program's annual servicing fee at rates below zero credit subsidy; increasing the 7(a) loan program's FY2019 annual servicing fee's cap from 0 55% to 0 625%; and increasing the FY2019 upfront loan guarantee fee on 7(a) loans over $1 million by 0 25%  The Administration also requested that the 7(a) loan program's authorization limit be increased to $30 0 million in FY2019; that the SBA be allowed to further increase the 7(a) loan program's authorization amount in FY2019 by 15% under specified circumstances "to better equip the SBA to meet peaks in demand while continuing to operate at zero subsidies;" that the SBA be allowed to impose an annual fee, not to exceed 0 05% per year, of the outstanding balance on 7(a) secondary market trust certificates to help offset administrative costs; and that the SBAExpress program's loan limit be increased from $350,000 to $1 million  P L  116-6 , the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30 0 billion in FY2019  The congressional debate concerning the SBA's 7(a) program during the 111 th Congress was not whether the federal government should act, but which federal policies would most likely enhance small businesses' access to capital and result in job retention and creation  As a general proposition, some Members of Congress argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs  Others worried about the long-term adverse economic effects of spending programs that increase the federal deficit  They advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to help small businesses further economic growth and job creation  In terms of specific program changes, increasing the 7(a) program's loan limit, extending the 7(a) program's temporary fee subsidies and 90% maximum loan guaranty percentage, and establishing an alternative size standard for the 7(a) program were all designed to achieve the same goal: to enhance job creation by increasing the ability of 7(a) borrowers to access credit at affordable rates  However, determining how specific changes in federal policy are most likely to enhance job creation is a challenging task  For example, a 2008 Urban Institute study concluded that differences in the term, interest rate, and amount of SBA financing were "not significantly associated with increasing sales or employment among firms receiving SBA financing " The study also reported that the analysis accounted for less than 10% of the variation in firm performance  The Urban Institute suggested that local economic conditions, local zoning regulations, state and local tax rates, state and local business assistance programs, and the business owner's charisma or business acumen also "may play a role in determining how well a business performs after receipt of SBA financing " As the Urban Institute study suggests, because many factors influence business success, measuring the 7(a) program's effect on job retention and creation is complicated  That task is made even more challenging by the absence of performance-oriented measures that could serve as a guide  Both GAO and the SBA's OIG have recommended that the SBA adopt outcome performance-oriented measures for its loan guaranty programs, such as tracking the number of borrowers who remain in business after receiving a loan to measure the extent to which the program contributed to their ability to stay in business  Other performance-oriented measures that Congress might also consider include requiring the SBA to survey 7(a) borrowers to measure the difficulty they experienced in obtaining a loan from the private sector and the extent to which the 7(a) loan or technical assistance received contributed to their ability to create jobs or expand their scope of operations  The 7(a) program has several specialized programs that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress, Export Express, and Community Advantage programs  Lenders must be approved by the SBA for participation in these programs  SBAExpress Program The SBAExpress program was established as a pilot program by the SBA on February 27, 1995, and made permanent through legislation, subject to reauthorization, in 2004 ( P L  108-447 , the Consolidated Appropriations Act, 2005)  The program is designed to increase the availability of credit to small businesses by permitting lenders to use their existing documentation and procedures in return for receiving a reduced SBA guaranty on loans  It provides a 50% loan guaranty on loan amounts up to $350,000  As shown in Table A-1 , the SBA approved 27,794 SBAExpress loans (46 1% of total 7(a) program loan approvals), totaling $1 98 billion (7 8% of total 7(a) program amount approvals) in FY2018  The program's higher loan amount in FY2011 was due, at least in part, to a provision in P L  111-240 , the Small Business Jobs Act of 2010, which temporarily increased the SBAExpress program's loan limit to $1 million for one year following enactment (through September 27, 2011)  During the 112 th Congress, H R  2936 , the Small Business Administration Express Loan Extension Act of 2011, would have extended the SBAExpress program's higher loan limit for an additional year (through September 27, 2012)  SBAExpress loan proceeds can be used for the same purposes as those of the 7(a) program (expansion, renovation, new construction, the purchase of land or buildings, the purchase of equipment, fixtures, and lease-hold improvements, working capital, to refinance debt for compelling reasons, seasonal line of credit, and inventory); except that participant debt restructure cannot exceed 50% of the project and may be used for revolving credit  The program's loan terms are the same as those of the 7(a) program (the loan maturity for working capital, machinery, and equipment (not to exceed the life of the equipment) is typically 5 years to 10 years; and the loan maturity for real estate is up to 25 years, except that the term for a revolving line of credit cannot exceed 7 years  The SBAExpress loan's interest rates and fees are the same as those used for the 7(a) program  To account for the program's lower guaranty rate of 50%, lenders are allowed to perform their own loan analysis and procedures and receive SBA approval with a targeted 36-hour maximum turnaround time  Also, collateral is not required for loans of $25,000 or less  Lenders are allowed to use their own established collateral policy for loans over $25,000  As mentioned earlier, the SBA waived the up-front, one-time loan guaranty fee for 7(a) loans of $125,000 or less approved in FY2018  The SBA also waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $125,001 to $350,000 in FY2018  In addition, P L  114-38 , the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran's fee waiver in the SBAExpress program, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero  The SBA waived this fee in FY2016, FY2017, and FY2018 and is waiving it in FY2019  The SBA indicated that its fee waivers for veterans are part "of SBA's broader efforts to make sure that veterans have the tools they need to start and grow a business " In a related development, the SBA discontinued the Patriot Express Pilot Program on December 31, 2013  It provided loans of up to $500,000 (with a guaranty of up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000) to veterans and their spouses  It had been in operation since 2007, and, like the SBAExpress program, featured streamlined documentation requirements and expedited loan processing  Over its history, the Patriot Express Pilot Program disbursed 9,414 loans amounting to more than $791 million  Export Express The Export Express program was established as a subprogram of the SBAExpress program in 1998, and made a separate pilot program in 2000  It was made permanent through legislation, subject to reauthorization, in 2010 ( P L  111-240 , the Small Business Jobs Act of 2010)  The Export Express program is designed to increase the availability of credit to current and prospective small business exporters that have been in business, though not necessarily in exporting, for at least 12 full months, particularly those small businesses needing revolving lines of credit  Export Express loans may not be used to finance overseas operations, except for the marketing or distribution of products or services exported from the United States  The program is generally subject to the same loan processing, making, closing, servicing, and liquidation requirements as well as the same maturity terms, interest rates, and applicable fees as the SBAExpress program  Two key differences between the two programs is that the Export Express program's maximum loan amount is up to $500,000, and its guaranty rate is 90% for loans of $350,000 or less, and 75% for loans exceeding $350,000  There were 215 lenders with approved SBA Export Express loan guaranties at the end of FY2017  These lenders are located in 46 states, Guam, and Puerto Rico  As shown in Table A-2 , the SBA approved 59 Export Express loans totaling $15 45 million in FY2018  Community Advantage 7(a) Loan Initiative The SBA's Community Advantage (CA) 7(a) loan initiative became operational on February 15, 2011  Originally announced as a three-year pilot program (through March 15, 2014), it subsequently was extended through March 15, 2017; March 31, 2020; and September 30, 2022  As of September 12, 2018, there were 113 approved CA lenders, 99 of which were actively making and servicing CA loans  The CA loan initiative is designed to increase lending to underserved low- and moderate-income communities  It, along with the now-discontinued Small Loan Advantage program, replaced the Community Express Pilot Program, which also was designed to increase lending to underserved communities  The CA loan initiative provides the same loan terms, guaranty fees, and guaranty as that of the 7(a) program on loan amounts up to $250,000 (85% for loans up to $150,000 and 75% for those greater than $150,000)  Loan proceeds can be used for the same purposes as those of the 7(a) program  The loan's maximum interest rate is prime, plus 6%  The program has an expedited approval process, which includes a two-page application for borrowers and a goal of completing the approval process within 5 to 10 days  The CA loan initiative is designed to increase "the number of SBA 7(a) lenders who reach underserved communities, targeting community-based, mission-focused financial institutions which were previously not able to offer SBA loans " These mission-focused financial institutions include the following: nonfederally regulated Community Development Financial Institutions certified by the U S  Department of the Treasury, SBA's Certified Development Companies, SBA's nonprofit microlending intermediaries, and, added in December 2015, SBA's Intermediary Lending Pilot Program intermediaries  They are expected to maintain at least 60% of their SBA loan portfolio in underserved markets, including loans to small businesses in, or that have more than 50% of their full-time workforce residing in, low-to-moderate income (LMI) communities; Empowerment Zones and Enterprise Communities; HUBZones; start-ups (firms in business less than two years); businesses eligible for the SBA's Veterans Advantage program; Promise Zones (added in December 2015); and Opportunity Zones and Rural Areas (added in October 2018)  The SBA placed a moratorium, effective October 1, 2018, on accepting new CA lender applications, primarily as a means to mitigate the risk of future loan defaults  The SBA also increased the minimum acceptable credit score for CA loans "that satisfies the need to consider several required underwriting criteria" from 120 to 140; increased the wait time for CA lenders ineligible for delegated lender status at the time of approval as a CA lender from 6 months to 12 months and increased the number of CA loans that must be initially dispersed before a CA lender may process applications under delegated authority from five to seven loans; increased the loan loss reserve requirement for CA loans sold in the secondary market from 3% to 5% of the outstanding amount of the guaranteed portion of each loan; modified requirements related to the refinancing of debts with a CA loan; limited fees that can be charged by a CA lender for assistance in obtaining a CA loan to no more than $2,500, with the exception of necessary out-of-pocket costs such as filing or recording fees; and as mentioned previously, added Opportunity Zones and Rural Areas to the list of economically distressed communities that are eligible for a CA loan  As shown in Table A-3 , the SBA approved 1,118 CA loans amounting to $157 5 million in FY2018 and 4,906 CA loans amounting to $643 72 million from the time the program became operational to the end of FY2018  As mentioned previously, legislation was introduced during the 114 th Congress ( S  2125 , the Small Business Lending and Economic Inequality Reduction Act of 2015) to provide the Community Advantage Pilot program permanent, statutory authorization 

ground_truth: Since 2012, the United States has provided approximately $36 billion in humanitarian assistance to save lives and alleviate human suffering. Much of this assistance is provided in areas plagued by conflict or other issues that increase the risk of financial crimes. The World Bank and others have reported that humanitarian assistance organizations face challenges in accessing banking services that could affect project implementation. GAO was asked to review the possible effects of decreased banking access for nonprofit organizations on the delivery of U.S. humanitarian assistance. In this report, GAO examines (1) the extent to which State and USAID partners experienced banking access challenges, (2) USAID partners' reporting on such challenges, and (3) actions U.S. agencies have taken to help address such challenges. GAO selected four high-risk countries—Syria, Somalia, Haiti, and Kenya—based on factors such as their inclusion in multiple financial risk-related indices, and selected a non-generalizable sample of 18 projects in those countries. GAO reviewed documentation and interviewed U.S. officials and the 18 partners for the selected projects. Implementing partners (partners) for 7 of 18 Department of State (State) and U.S. Agency for International Development (USAID) humanitarian assistance projects that GAO selected noted encountering banking access challenges, such as delays or denials in transferring funds overseas. Of those 7 projects, 1 partner told us that banking access challenges adversely affected its project and 2 additional partners told us that the challenges had the potential for adverse effects. Moreover, the majority of partners (15 out of 18) for the 18 projects noted experiencing banking access challenges on their global portfolio of projects over the previous 5 years. USAID's partners' written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation. Six of the 7 projects that encountered challenges were USAID-funded. Of those 6 USAID projects, 5 partners told us that these challenges did not rise to the threshold of affecting project implementation that would necessitate reporting, and 1 did not report challenges although its project was adversely affected. Additionally, GAO's review of about 1,300 USAID partner reports found that the few instances where challenges were mentioned lacked sufficient detail for GAO to determine their type, severity, or origin. Without information on banking access challenges that pose potential risks to project implementation, USAID is not aware of the full extent of risks to achieving its objectives. The Department of the Treasury (Treasury) and State have taken various actions to help address banking access challenges encountered by nonprofit organizations (NPO), but USAID's efforts have been limited. Treasury's efforts have focused on engagement between NPOs and U.S. agencies, while State has issued guidance on the topic to its embassies and designated an office to focus on these issues. In contrast, USAID lacks a comparable office, and NPOs stated that it is difficult to find USAID staff to engage with on this topic. Further, GAO found that awareness of specific challenges was generally limited to USAID staff directly overseeing the project. Without communicating these challenges to relevant parties, USAID may not be aware of all risks to agency objectives and may not be able to effectively engage with external entities on efforts to address these challenges. GAO recommends that USAID should take steps to (1) collect information on banking access challenges experienced by USAID's partners and (2) communicate that information both within USAID and with external entities, such as other U.S. agencies and partners. USAID concurred with our recommendations.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: International financial transactions, including the transfer of U S  humanitarian assistance funds, rely on a system of correspondent banking relationships  State and USAID provide humanitarian assistance through funding awards to partners  Funds to U S  partners are deposited into the partners’ bank accounts located in the United States  The partners are then responsible for transferring the funds to recipient countries for project implementation  These transfers typically involve the use of a correspondent, or intermediary, bank to transfer the funds from a U S -based account to an account held at the recipient country, where the funds are then used by in-country staff to implement the project  See appendix IV for more information on the State and USAID offices providing humanitarian assistance  According to research by the Bank for International Settlements, the number of correspondent banking relationships has declined over the past several years, especially for banks that are located in higher-risk jurisdictions (such as those subject to sanctions), have customers perceived as higher-risk, and who generate revenues insufficient to recover compliance costs  Further, the Financial Stability Board noted that a decline in the number of correspondent banking relationships could affect the ability to send and receive international payments and may drive some payment flows underground, with potential consequences on growth, financial inclusion, and the stability and integrity of the financial system  When performing overseas money transfers, U S  banks and financial institutions must comply with the Bank Secrecy Act’s (BSA) anti-money laundering (AML) regulations and relevant regulations that implement U S  sanctions  The BSA has established reporting, recordkeeping, and other AML requirements for financial institutions  BSA/AML regulations require that each bank tailor a compliance program that is specific to its own risks based on factors such as products and services offered, and customers and locations served  By complying with BSA/AML requirements, U S  financial institutions assist government agencies in the detection and prevention of money laundering and terrorist financing by, among other things, maintaining compliance policies, conducting ongoing monitoring of customers and transactions, and reporting suspicious financial activity  In addition to BSA regulations established by Treasury, federal banking regulators have issued their own BSA regulations  These regulations require banks to establish and maintain a BSA compliance program that, among other things, identifies and reports suspicious activity  The banking regulators are also required to review banks’ compliance with BSA/AML requirements and regulations, and they generally do so every 12 to 18 months as a part of their routine safety and soundness examinations  Among other things, examiners review whether banks have an adequate system of internal controls to ensure ongoing compliance with BSA/AML regulations  The federal banking regulators may take enforcement actions using their prudential authorities for violations of BSA/AML requirements  They may also assess civil money penalties against financial institutions and individuals  Banks must also comply with relevant regulations that implement U S  sanctions in certain countries  When the United States imposes sanctions on an entity or individual, it freezes assets subject to U S  jurisdiction  All U S  transactions with the entity or individual are prohibited, including transactions by banks and NPOs  When appropriate, Treasury’s Office of Foreign Assets Control (OFAC) may issue a general license authorizing the performance of certain categories of transactions, including funds transfers for the provision of humanitarian assistance  OFAC also issues specific licenses on a case-by-case basis under certain limited situations and conditions  Treasury, as a lead agency in fighting financial crimes and as an issuer of regulations that have a significant effect on charities’ access to the banking system, takes actions to help prevent financial crimes, and considers NPOs operating in conflict areas and other high risk zones as potentially vulnerable to such crimes  Treasury leads U S  efforts to fight various financial crimes primarily through its Office of Terrorism and Financial Intelligence (TFI)  TFI develops and implements U S  government strategies to combat terrorist financing domestically and internationally, and develops and implements the National Money Laundering Strategy as well as other policies and programs to fight financial crimes  Relevant offices under TFI include: The Office of Terrorist Financing and Financial Crimes (TFFC)  TFFC, the policy development and outreach office for TFI, works across all elements of the national security community – including the law enforcement, regulatory, policy, diplomatic, and intelligence communities – and with the private sector and foreign governments to identify and address the threats presented by all forms of illicit finance to the international financial system  The Office of Foreign Assets Control (OFAC)  OFAC administers and enforces economic and financial sanctions based on U S  foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, transnational criminal organizations, human rights abusers and corrupt actors, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States  The Financial Crimes Enforcement Network (FinCEN)  FinCEN, among other duties, is responsible for administering the BSA, has authority for enforcing compliance with its requirements and implementing regulations, and also has the authority to enforce the BSA, including through civil money penalties  FinCEN issues regulations under the BSA and relies on the examination functions performed by other federal regulators, including federal banking regulators  FinCEN also collects, analyzes, and maintains the reports and information filed by financial institutions under BSA and makes those reports available to law enforcement and regulators  According to Treasury, organizations, including NPOs, implementing humanitarian assistance in high-risk areas may be vulnerable to exploitation by terrorist groups and their support networks  These terrorist groups and support networks may establish or abuse charities to raise and move funds, or provide other forms of support, that benefit the terrorist groups  As of May 2017, Treasury, through OFAC, had designated 67 charities, branches, and foreign terrorist organizations’ potential fundraising front organizations for violations of U S  sanctions  For 7 of our 18 selected projects, State and USAID partners told us that they had experienced banking access challenges  Additionally, 15 of the 18 partners we interviewed noted that they had experienced banking access challenges on their global portfolio of humanitarian assistance projects over the previous 5 years  Most of the 18 partners we interviewed told us that they were able to mitigate these challenges through various actions or the challenges were not significant enough to affect project implementation  Nevertheless, a few partners noted that projects they were implementing were adversely affected by such challenges  For example, 1 of our 18 selected projects faced repeated delays as a result of banking access challenges  Additionally, 2 partners noted that they had to reduce the scope of implementation or suspend projects in their global humanitarian assistance portfolio because of banking access challenges  Furthermore, several partners and other NPOs told us that such challenges posed potential risks to project implementation  Lastly, a recent study found that more than two-thirds of all U S -based NPOs that work internationally experienced banking access challenges, but that few NPOs canceled programs as a result of those challenges  For our 18 selected U S -funded projects, 7 of the partners told us that they had experienced banking access challenges in implementing their projects, with the majority citing delays or denials of funds transfers  Specifically, 3 (of 5) partners in Somalia and 4 (of 7) partners in Syria told us that they had experienced banking access challenges related to the selected project  None of the partners implementing selected sample projects in Haiti or Kenya noted that they had experienced any banking access challenges  Denials of funds transfers to the destination country was the most frequently cited banking access challenge (experienced by 5 of the 7 projects), followed by delays of funds transfers (experienced by 3 of the 7 projects) (see fig  2)  Fifteen of the 18 partners that we interviewed noted that they had experienced banking access challenges on their global portfolio of humanitarian assistance projects implemented over the previous 5 years (see fig  3)  The most frequently cited challenges were funds transfer delays and denials  Twelve partners noted that they had experienced transfer delays, with 8 noting that the delays occurred occasionally and 6 noting that the delays lasted weeks or months  Most partners that noted experiencing delays told us that the delays were caused exclusively by intermediary banks  Eleven partners noted that they had experienced transfer denials, including 5 that told us the denials occurred occasionally  Five partners also noted that transfers were denied by intermediary banks  In addition, 2 partners noted that they had experienced challenges opening new bank accounts; 3, increased costs to transfer funds; 1, a bank-initiated account closure; and 2, other challenges  For more information on the types of banking access challenges that partners identified, including details on the duration of delays and the frequency of denials, see appendix V  Some partners that experienced banking access challenges told us that those challenges had adversely affected or posed a potential risk to implementation of projects  Of those partners experiencing challenges, 3 partners noted that banking access challenges had adversely affected a project’s implementation  Specifically, 1 partner that experienced challenges on one of our selected projects and 2 partners that experienced challenges on projects outside of our sample noted that the challenges they had experienced resulted in a project being adversely affected in some form, such as: Reduced scope of implementation  One partner told us that its project in the Democratic People’s Republic of Korea was scaled back significantly because of difficulty transferring funds to the country  Delays implementing a project  One partner told us that for one of our selected projects, in part because of banking access challenges, implementation of the project was delayed and required approval for two no-cost extensions from USAID  The partner noted that it had experienced recurring issues with funds transfers to Syria, including 3- to 6-week delays and frequent denials of transfers  Suspension of an in-progress project  One partner told us that an ongoing project it implemented in Syria (outside of our sample of projects) to deliver food assistance had been suspended for about a week because its funds transfers to the country were denied  While some projects were adversely affected, 6 of the 7 partners of our selected projects that noted experiencing banking access challenges told us that the challenges they had experienced did not adversely affect project implementation  Similarly, 12 of the 15 partners that noted experiencing banking access challenges on their global portfolio of humanitarian assistance told us that the challenges did not affect project implementation  Additionally, for both our selected projects and their global portfolio of humanitarian assistance projects, the challenges experienced were either not significant enough to affect project implementation, or were mitigated through various actions  For example, partners told us that they had mitigated challenges by: Maintaining a funding buffer  Partners may keep enough funding to operate a project for several weeks in order to mitigate delays and denials of funds transfers  For example, one partner noted that projects maintain approximately 4 weeks of operating funds on hand, which is enough to mitigate transfer delays that last up to 3 weeks  Using alternate methods to move funds  Partners may use alternate methods to move funds, such as using different intermediary banks or money transmitters, or by carrying cash  For example, one partner told us that when its U S  bank stopped allowing funds transfers to Syria, the partner opened an account with a different bank  That partner also told us that because it was unable to reliably transfer funds to Syria, it regularly transfers funds to Lebanon—either to intermediaries or to the personal accounts of individuals involved in the projects—and manually moves the physical currency to Syria  Maintaining multiple bank accounts  Partners may maintain accounts with multiple banks in order to mitigate the risk of a bank-initiated account closure  For example, one partner told us that after a bank closed all of its accounts without warning or explanation, the partner opened accounts across three different banks in order to mitigate the effects of any individual bank closing its account  While most partners’ projects did not experience adverse effects as a result of banking access challenges, three USAID partners—as well as another NPO that we spoke with—told us that banking access challenges posed a potential risk to project implementation, such as: Potential for physical violence  One partner told us that, for one of our selected projects, there were concerns of violence if payments were halted because of funds transfer delays, while another partner told us that violence was a concern if it was unable to pay vendors on time  An NPO also told us that there was a potential for physical violence if local staff were not paid on time  Potential for insolvency of vendors  One partner told us that, for one of our selected projects, transfer delays prevented it from reimbursing a money transmitter it used to move funds to Somalia, which in turn caused that money transmitter to experience financial difficulties  The partner stated that the delays were almost significant enough to affect operations, though it was able to resolve the situation in time to prevent its vendor from becoming insolvent  Potential for project suspension  One partner told us that it provides advance funding for projects to account for delays, but at times transfer delays have come close to exhausting the advance funding  For example, the partner told us that it provided funding for projects 4 weeks in advance and experienced transfer delays averaging 3 weeks  In addition, an NPO told us that staff are sometimes not paid for several months because of such delays; thus, if transfer delays worsened or staff were unwilling to work without being paid, project implementation may be adversely affected  A recent study by Charity and Security Network on banking access for U S  NPOs, which included NPOs that received U S  government funds, found widespread banking challenges for U S -based NPOs  Data for a survey conducted as part of this study indicated that about two-thirds of the responding U S -based NPOs that work internationally experienced banking access challenges  The challenges included delays of wire transfers, unusual requests for documentation, and increased fees  Some NPOs also cited experiencing account closures and refusals to open accounts  About 15 percent of the NPOs that responded to the survey noted that they experienced these banking access challenges constantly or regularly, and about 3 percent of NPOs reported cancelling a project because of banking access challenges  Furthermore, transfers to all parts of the globe were affected, and the challenges were not limited to conflict zones  According to the report, NPOs with 500 or fewer staff were more likely to experience delayed wire transfers, fee increases, and account closures  Smaller organizations were more likely to receive unusual requests for documentation, according to the report  The smallest NPOs, those with 10 or fewer employees, reported experiencing more trouble opening accounts than larger organizations  According to the report, as a result of the challenges they experienced, NPOs were sometimes forced to move money through less transparent, less traceable, and less safe channels, such as carrying cash  As shown in table 1, survey data from the Charity and Security Network study indicated that there were only minor differences between NPOs receiving and not receiving U S  government funding in terms of experiencing banking access challenges  For example, about 15 percent of responding NPOs, regardless of whether or not they received U S  funds, noted experiencing banking access challenges regularly or constantly, with transfer delays the challenge most frequently cited by both groups  Additionally, about the same proportion of NPOs that received or did not receive U S  funds reported that they rarely or never experienced banking access challenges  Both groups of NPOs also noted taking similar measures to deal with banking access challenges  USAID’s partners’ written reports do not capture potential risks posed by banking access challenges because USAID generally does not require most partners to report in writing any challenges that do not affect implementation  Six of the 7 projects that noted experiencing banking access challenges were USAID projects  None of those 6 USAID partners reported on the banking access challenges they had experienced to USAID in their regular project reporting  USAID requires partners to report adverse effects to their projects, but 1 partner that faced delays on its project as a result of banking access challenges did not identify these challenges as the reason for delays in its reporting to USAID  We also reviewed over 1,300 USAID partner reports for fiscal years 2016 and 2017 from high-risk countries and found no explicit discussion of banking access challenges  USAID generally requires partners implementing humanitarian assistance projects to report challenges that affect project implementation  USAID, through the Office of U S  Foreign Disaster Assistance (OFDA) and the Office of Food For Peace (FFP), provides humanitarian assistance and monitors the implementation of projects through various methods, including periodic performance reports  USAID’s reporting requirements, as well as the number of partners of selected projects that told us they had experienced banking access challenges, are as follows: USAID/OFDA  USAID/OFDA agreements for the selected projects we reviewed require the awardee to report via email (1) developments that have a significant effect on the activities supported by the agreement, and (2) problems, delays, or adverse conditions that materially impair the ability to meet the objectives of this agreement  The agreements also require Program Performance Reports that must address reasons why established goals were not met, the impact on the program objectives, and how the impact has been or will be addressed  Four of the 6 USAID partners that told us they had experienced banking access challenges were implementing USAID/OFDA projects  USAID/FFP  USAID/FFP’s Fiscal Year 2017 Annual Program Statement for International Emergency Food Assistance requires partners to report, as part of their quarterly reporting, any challenges that the project has faced during the quarter and how they were resolved and discuss any potential challenges or delays that may affect the program’s ability to achieve its objectives  Each of the agreements—both for NPOs and for public international organizations—that we reviewed require the partner to notify USAID of any developments, problems, or delays that may have an adverse effect on the project  Two of the 6 USAID partners that told us they had experienced banking access challenges were implementing USAID/FFP projects  Five of the 6 USAID partners of selected sample projects that noted experiencing banking access challenges told us those challenges did not adversely affect project implementation and therefore did not need to be reported  The sixth—a partner that noted its project was adversely affected by banking access challenges—did not include these challenges in its reporting to USAID, although the challenges met the reporting threshold of adversely affecting project implementation  While both USAID and the partner told us that the delays were communicated to USAID through emails and conversations with a designated USAID contact and in the justification for the no-cost extensions submitted to USAID, our review of the partner’s program performance reports to USAID and the no-cost extensions found no explicit discussion of banking access challenges  Our review of the over 1,300 publicly available USAID partner reports for fiscal years 2016 and 2017 from high-risk countries found no explicit discussion of banking access challenges  Overall, we identified 5 reports out of the over 1,300 that included some mention of challenges related to banking access  However, those reports lacked sufficient detail for us to determine the type, severity, or origin of the challenges  For example, one report stated that there are sometimes delays in the payment of salaries through foreign accounts, with no further details about the delays, while another report stated that subgrantees experienced delays in payments without identifying the reasons for these delays, which could include late reports, late verification, late processing, or banking issues  While most of the partners we interviewed noted that they did not report banking access challenges because the challenges did not adversely affect their projects, an NPO advocacy group and a large international NPO told us that NPOs may be reluctant to discuss or report banking access challenges publicly because of concern about being perceived as high-risk or unable to carry out their mission, and that any public mention of banking access challenges could adversely affect their ability to raise funds  Standards for Internal Control in the Federal Government require agencies to identify and respond to risks related to achieving their goals, and USAID currently has no other process for collecting information on banking access challenges affecting its partners  Without this information, USAID does not have a record of the frequency and prevalence of the challenges and may not be aware of the full extent of risks to achieving its humanitarian assistance objectives  Further, as mentioned previously, two USAID partners stated that their projects faced potential adverse effects from banking access challenges  Documenting the prevalence and frequency of banking access challenges experienced by USAID partners is important given the potential adverse effects that these challenges can have on project implementation  Both Treasury and State have taken actions to help address banking access challenges encountered by NPOs; however, USAID’s efforts to address these challenges have been limited by a lack of communication about them—both within the agency and with external entities  Treasury, as a lead agency in fighting financial crimes and as an issuer of regulations that have a significant effect on charities’ access to the banking system, has conducted meetings between charities, banks, and government officials to discuss banking access challenges and released guidance on sanctions and other related issues  State, as a provider of funding for humanitarian assistance, has issued guidance to its overseas posts on banking access challenges  In addition, both State and Treasury are involved in international efforts led by the World Bank and the Financial Action Task Force (FATF) to help address banking access challenges  Although USAID’s partners have experienced banking access challenges, USAID has had more limited engagement than State and Treasury with other agencies, international organizations, and NPOs on addressing such challenges—in part because of a lack of communication about them, both within the agency and with external entities  Treasury’s efforts to help address banking access challenges encountered by NPOs include holding roundtable meetings and issuing guidance and resources for charitable organizations  Treasury, in its role as a regulator of the banking system, serves as a nexus between the banks and the U S  agencies providing humanitarian assistance  Treasury has organized several roundtable meetings with the charitable sector to facilitate a dialogue on banks’ expectations  These sessions brought together representatives from charities, banks, financial supervisors, and the U S  government to discuss the factors that banks consider related to charity accounts and that examiners use in their review of banks’ procedures  Since 2013, Treasury’s Office of Terrorist Financing and Financial Crimes (TFFC) has dedicated three of these roundtable meetings specifically to banking access challenges affecting charities, as follows: December 17, 2013: This initial Treasury / TFFC working group meeting with charities included a discussion of terrorist financing risk mitigation guidance  There was also a discussion of banking access challenges, during which TFFC provided an overview of the NPO section of the manual used by bank examiners to conduct bank examinations and explained the bank examination process to the charities  March 21, 2014: This meeting focused on a discussion of access to financial services for charities  A Muslim-American charity delivered a presentation on how it has managed its banking relationships over the past several years  Several banks also delivered presentations to help charities better understand the factors that banks consider and the complex processes related to banking transactions and opening or maintaining bank accounts  November 12, 2015: This meeting included a stakeholder discussion of banking access challenges for charities, with charities, bankers, and regulators presenting each of their perspectives and discussing the challenges faced on all sides  In addition, in May 2015, Treasury, with the Department of Homeland Security, conducted a roundtable on banking access challenges with Syrian-American charities, U S  regulators, and bankers  This event was focused on challenges affecting the Syrian-American charitable community and delivering humanitarian assistance to Syria during the worsening conflict  Treasury provided guidance related to OFAC’s general license 11a for U S  charities to provide humanitarian assistance for Syria  Further, officials reported that Treasury also maintains contact with the charitable sector through various domestic and international events, and holds frequent meetings with members of the charitable sector in Washington, D C  and around the United States  Treasury has also issued guidance and resources on its website for charities, including frequently asked questions and best practices  Treasury’s website provides information and resources for all stakeholders in four strategic areas—private sector outreach, coordinated oversight, targeted investigations, and international engagement  The guidance includes: voluntary best practices regarding anti-terrorist financing for charities, lists of frequently asked questions regarding sanctions and charities, list of charities that have been designated by OFAC for assisting or having ties to terrorist organizations, several international multilateral organization reports on banking access challenges and terrorist exploitation of charities, and OFAC guidance specifically related to the provision of humanitarian assistance  Lastly, Treasury has taken actions on derisking challenges more generally  According to Treasury officials, these more general actions focused on encouraging dialogue and making clear to financial institutions that they are expected to make individual risk-based decisions rather than wholesale, indiscriminate policies for entire sectors or classes of customers  Treasury officials noted that banks retain the flexibility to make business decisions such as which clients to accept, since banks are in the best position to know whether they are able to implement controls to manage the risk associated with any given client  These officials indicated that Treasury pursues market-driven solutions and cannot order banks to open or maintain accounts  The officials have stated that Treasury does not view the charitable sector as presenting a uniform or unacceptably high risk of money laundering, terrorist financing, or sanctions violations  However, charities delivering critical assistance in high-risk conflict zones have, in some cases, had terrorist organizations and their support networks exploit donations and operations to support terrorist activities  State has issued guidance to its staff overseas to help address banking access challenges encountered by NPOs and others and identified a focal point for banking access challenges within the agency  In July 2017, State issued internal guidance, through a document issued to all of its overseas embassies, regarding derisking  State, based on guidance from Treasury, developed guidance for all personnel that provides background on “de-risking” and related talking points, additional web-based resources, and an assessment framework tool to evaluate the current state of banking relationships in a given market  The guidance includes links to resources from Treasury, U S  banking regulators, and various international organizations, such as the World Bank, International Monetary Fund, and FATF  The guidance is designed to give embassy staff some tools to work with host governments on these issues and to help identify countries and markets where further U S  government engagement is necessary  In addition, State’s Office of Threat Finance Countermeasures serves as the main focal point for all banking access challenges brought to the attention of State  This office provides assistance to State’s embassies when banking-access-related issues are raised through the embassy to State headquarters  All embassy staff, as part of the guidance issued on derisking, have been instructed to direct all questions received on banking access issues to the Office of Threat Finance Countermeasures  In addition, this office is responsible for interfacing with Treasury on banking access issues and staff from this office have attended all of the relevant Treasury-hosted roundtable meetings focused on banking access challenges encountered by charities  The World Bank and FATF have several efforts underway—with participation from Treasury and State—to address banking access challenges for NPOs  The World Bank, in collaboration with the Association of Certified Anti-Money Laundering Specialists (ACAMS), is working with humanitarian organizations, banks, and U S  regulators on the question of how humanitarian organizations can maintain access to the financial system  More specifically, the World Bank and ACAMS have launched three primary work streams focused on different aspects of banking access to improve NPOs’ understanding of what the financial institutions require and to improve the banks’ understanding of how NPOs operate  According to a World Bank official, the three workstreams are as follows: Work Stream 1: This work stream aims to ensure a better understanding of bank examiners of the NPO sector and to enable more risk differentiation on the part of those examiners when they conduct on-site supervision and examine bank client accounts  Work Stream 2: This work stream aims to help banks conduct due diligence on charities more easily through the use of technological tools, such as databases that contain key information on charities  Work Stream 3: This work stream aims to work with the regulatory bodies to help bank examiners change their perceptions of the risk potential of charities  In addition, the World Bank and ACAMS have organized roundtable meetings as part of the ongoing Stakeholder Dialogue on De-Risking  The objectives of a January 2017 meeting were to promote access of humanitarian organizations to financial services and to discuss practical measures to foster the relationship between NPOs and financial institutions, improve the regulatory and policy climate for financial access for NPOs, and build coalitions and create opportunities for sharing information and good due diligence practices  Officials from Treasury and State have been involved with the dialogues and various work streams  FATF, with participation from both Treasury and State, also has several efforts underway to help address banking access challenges, including revising its recommendations and issuing guidance  Derisking has been a stated FATF priority since October 2014  In June 2016, FATF revised its recommendation that pertains to how countries should review NPOs and its interpretive note to better reflect how to implement measures to protect NPOs from terrorist abuse, in line with the proper implementation of the risk-based approach  According to Treasury, this approach emphasizes that not all charities are considered high-risk  Specific changes included defining NPOs, removal of the words “particularly vulnerable” from previous language, and emphasis on a risk-based approach for evaluating NPOs  The FATF has also issued guidance and best practices to guide both financial institutions and regulators on how to properly implement the risk-based approach, in line with the revised FATF recommendations  Additionally, according to Treasury, the FATF updated a report analyzing the global terrorist threat to the charitable sector, gathering over 100 examples of terrorist abuse of charities to pinpoint which types of charities are considered higher-risk  This report and its findings were published in June 2014  USAID efforts to address banking access challenges have been limited, in part because of a lack of communication within the agency and with external entities about challenges faced by USAID’s partners  Within USAID, we found that information on banking access challenges faced by partners was not always communicated beyond staff directly overseeing the project  We found that the USAID staff who had direct responsibility for managing the project were generally aware of banking access challenges that affected project implementation, and had taken steps to help mitigate these challenges on a project-level basis  However, other relevant staff, such as USAID management and country-level headquarters staff, were not aware of these challenges  For example, partners in Syria and Somalia that we interviewed noted experiencing banking access challenges, but the USAID officials representing these countries in headquarters told us they were not aware of such challenges occurring recently  This situation may be, in part, because USAID has no designated office or process that focuses on communicating these issues throughout the agency to other relevant officials, including USAID management  Federal standards for internal control note that management should use quality information to achieve the entity’s objectives, and that entity management needs access to relevant and reliable communication related to internal as well as external events  If information on banking access challenges experienced by USAID partners is only reported to program-level staff and not communicated to a wider audience within the agency, then the agency as a whole may not fully recognize the overall risks posed by banking access challenges to USAID’s ability to achieve its objectives  Further, the agency may miss opportunities to assist other partners that might be experiencing similar issues based on lessons learned from previous experiences, if staff are not aware of the banking access challenges that have been experienced by its partners implementing other projects or working in other countries  USAID participation in interagency and partner efforts to address banking access challenges has been limited, in part because of a lack of communication with these external entities  According to Treasury officials, because there is no main focal point at USAID for banking access challenges, there is no consistency on who attends, or whether anyone attends, the Treasury-hosted roundtable meetings on banking access challenges from USAID  Further, an NPO trade association and other NPOs told us that it is difficult to find a person at USAID to engage with on banking access challenges  Lastly, a USAID/OFDA official stated that USAID has had limited engagement on issues related to banking access challenges  The OFDA official stated that once OFDA fully staffs its new Award, Audit, and Risk Management Team, it will be able to more fully engage on these issues  Federal standards for internal control state that management should communicate the necessary quality information both internally and externally to achieve the organization’s objectives  Without effective communication with partners and other government agencies about banking access challenges its partners face, USAID’s ability to effectively and consistently engage with these entities or contribute to efforts to help address these challenges is limited  The United States provides humanitarian assistance in countries that are often plagued by conflict, instability, or other issues that increase the risk of financial crimes  Some of these countries also face U S  sanctions that are aimed at their governments or other actors that engage in terrorism or illicit activities  Additionally, to ensure that the U S  financial system is not used for money laundering or financing terrorism, financial institutions such as banks are subject to various U S  laws and regulations that require banks to conduct proper due diligence on entities, such as those transferring funds to high-risk countries  However, there is concern among some organizations that banks’ higher level of due diligence, especially for clients such as charitable organizations that provide humanitarian assistance in high-risk countries, may create undue difficulties, including delays, for these organizations  Charitable organizations and others believe that because the United States and a key multilateral organization previously labeled charitable organizations as high-risk, banks remain reluctant to serve these organizations even though a case-by-case assessment of risk is now recommended  As such, we found that the majority of implementing partners—many of which are charitable organizations—of U S  government assistance that we interviewed had experienced some banking access challenges  Despite our findings and others’ findings on the prevalence of banking access challenges facing humanitarian assistance organizations, USAID’s current partner reporting does not capture information related to the potential risks of banking access challenges faced by its partners  Without collecting this information, USAID cannot help the partners mitigate banking access challenges  Additionally, if these challenges are not documented and shared throughout the agency, the prevalence of the challenges and potential risks cannot be fully assessed  Further, without communicating about banking access challenges faced by its partners throughout the agency and to others, the potential risk to agency objectives will not be known and USAID’s ability to engage with other agencies and organizations in helping to address these challenges is limited  We are making the following two recommendations to USAID: The Administrator of USAID should take steps to collect information on banking access challenges experienced by USAID’s implementing partners  (Recommendation 1) The Administrator of USAID should take steps to communicate information on banking access challenges faced by partners both within USAID and with external entities, such as other U S  agencies and U S  implementing partners  (Recommendation 2) We provided a draft of this report to State, USAID, and Treasury for comment  We received written comments from USAID that are reprinted in appendix VI  USAID concurred with our recommendations  Treasury provided technical comments, which we incorporated as appropriate  State told us that it had no comments on the draft report  We are sending copies of this report to the appropriate congressional committees, the Secretary of State, the Administrator of the U S  Agency for International Development, the Secretary of the Treasury, and other interested parties  In addition, the report is available at no charge on the GAO website at 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  GAO staff who made key contributions to this report are listed in appendix VII  While the Department of State (State) and the U S  Agency for International Development (USAID) have encountered some banking access challenges, such as closed accounts and delays in transferring funds, these challenges did not affect their operations for providing assistance to high-risk countries  To send funds overseas, State, through two U S  disbursement offices managed by State’s Bureau of the Comptroller and Global Financial Services (CGFS), maintains foreign currency bank accounts in 172 countries  Funds are transferred from a Federal Reserve Bank to a U S  dollar bank account maintained by State, after which the funds are directed through a correspondent bank or a foreign exchange broker to a foreign bank account maintained by State  A correspondent bank serves as the intermediary between the bank sending a transfer, in this case a U S  dollar denominated bank account, and the bank issuing payment to the recipient, in this case the State-held account in the recipient country  Both the bank sending the transfer and the bank receiving the transfer hold an account at the correspondent bank, which is used for fund transfers, cash management, and other purposes  According to State, all State transfers overseas, as well as the majority of USAID payments overseas, are managed by CGFS, and in fiscal year 2017 CGFS’s two disbursement offices processed approximately 3 million payments through accounts managed by State in 172 countries  State officials told us that State encounters occasional banking access challenges, including short delays in funds transfers, denials of funds transfers to certain countries, and one bank-initiated account closure  State officials told us that they are able to mitigate the occasional banking access challenges that they encounter to ensure operations are not affected  For example: State’s transfers to countries sanctioned by the Office of Foreign Asset Control (OFAC) are occasionally flagged by intermediary banks  According to State, in fiscal year 2017 approximately one- tenth of one percent (0 1%) of payments were delayed because of OFAC sanctions  When this occurs, State receives questions on the details of those transfers  According to officials, this is an ongoing challenge, but State resolves such delays within 2 weeks—and typically within days—and there are no operational effects as a result of the delays  In some instances—including once in 2012, and once in 2018—an intermediary bank used by CGFS’s U S  bank stopped processing transfers to a recipient bank in a specific country  According to State officials, in both cases State identified an alternative intermediary bank to transfer funds to the destination country  In both cases, there were no operational effects  In 2014, an intermediary bank used by CGFS’s U S  bank ended its banking relationship with an OFAC-sanctioned country (Syria), and State was unable to move funds from its U S -dollar denominated accounts to that country  State, with the advice of the recipient bank in the OFAC-sanctioned country, identified an alternative intermediary bank that was able to move funds to that country using euro-denominated accounts  In 2014, a U S  bank—at which State maintained an account and that State used to fund its operations in Brunei—notified State that it would be closing State’s account with 29 days’ notice  State worked with Treasury to identify an alternative bank that would be willing to maintain a State bank account  The operation was not affected  For this review, we selected four countries—Syria, Somalia, Haiti, and Kenya—that may have a higher risk of financial crimes because of conflict, instability, or other issues  We selected them based on factors including the level of humanitarian assistance they received from U S  agencies, their inclusion on multiple financial-risk-related indices, and geographical diversity  Syria  Since 2011, Syria has been plagued by an ongoing multisided armed conflict fought primarily between the government of President Bashar al-Assad, along with its allies, and various forces opposing both the government and each other  Syria’s economy has deeply deteriorated amid the ongoing conflict, declining by more than 70 percent from 2010 to 2017  During 2017, the ongoing conflict and continued unrest and economic decline worsened the humanitarian crisis, necessitating high levels of international assistance, as more than 13 million people remained in need inside Syria and the number of registered Syrian refugees increased from 4 8 million to more than 5 4 million  Multiple terrorist groups operate inside Syria, raising the potential risk of terrorist financing  Additionally, according to a Central Intelligence Agency report, Syria is a transit point for opiates, hashish, and cocaine bound for regional and Western markets, and weak anti-money-laundering controls and bank privatization may leave it vulnerable to money laundering  The U S  maintains a comprehensive Syria sanctions program  A general license in the Syria regulations authorizes nonprofit organizations to provide services, including financial services, to Syria in support of certain not-for-profit activities, such as activities to support humanitarian projects to meet basic human needs and support education in Syria  Organizations providing humanitarian assistance that is not authorized by the general license may apply for a specific license to engage in those transactions  The United States has provided approximately $3 3 billion in humanitarian assistance for Syria since 2012  Somalia  Since 1969, Somalia has endured political instability and civil conflict, and is the third-largest source of refugees, after Syria and Afghanistan  Somalia lacks effective national governance and maintains an informal economy largely based on livestock, money transfer companies, and telecommunications  In the absence of a formal banking sector, money transfer companies have sprung up throughout the country, handling up to $1 6 billion in remittances annually  According to a 2016 State report, Somalia remained a safe haven for terrorists who used their relative freedom of movement to obtain resources and funds, recruit fighters, and plan and mount operations within Somalia and neighboring countries  The United States maintains a targeted list-based Somalia sanctions program  Organizations providing humanitarian assistance may apply for a specific license to engage in transactions that otherwise would be prohibited by the Somalia sanctions regulations  The United States has provided approximately $1 2 billion in humanitarian assistance for Somalia since 2012  Haiti  Currently the poorest country in the western hemisphere, Haiti has experienced political instability for most of its history  Remittances are the primary source of foreign exchange, equivalent to more than a quarter of GDP, and nearly double the combined value of Haitian exports and foreign direct investment  In January 2010, a catastrophic earthquake killed an estimated 300,000 people and left close to 1 5 million people homeless  Hurricane Matthew, the fiercest Caribbean storm in nearly a decade, made landfall in Haiti on October 4, 2016, creating a new humanitarian emergency  An estimated 2 1 million people were affected by the category 4 storm, which caused extensive damage to crops, houses, livestock, and infrastructure across Haiti’s southern peninsula  Haiti is identified as a fragile state by the Organisation for Economic Co-operation and Development, and as a jurisdiction of primary concern for money laundering in State’s International Narcotics Control Strategy Report  According to USAID, the agency has provided $187 8 million in humanitarian assistance for Haiti since 2012  Kenya  Kenya is the economic, financial, and transport hub of East Africa  Since 2014, Kenya has been ranked as a lower middle income country because its per capita GDP crossed a World Bank threshold  Al-Shabaab aims to establish Islamic rule in Kenya’s northeastern border region and coast and carried out a spate of terrorist attacks in Kenya  Kenya is identified as a fragile state by the Organisation for Economic Co-operation and Development, and as a jurisdiction of primary concern for money laundering in State’s International Narcotics Control Strategy Report  The United States has provided approximately $807 million in humanitarian assistance for Kenya since 2012  This report examines (1) the extent to which implementing partners of the Department of State (State) and the U S  Agency for International Development (USAID) experience banking access challenges that affect their implementation of humanitarian assistance projects, (2) USAID implementing partners’ reporting on banking access challenges, and (3) actions relevant U S  agencies have taken to help address banking access challenges encountered by nonprofit organizations (NPO)  In addition, we provide information on the extent to which State and USAID experience banking access challenges in providing assistance in high-risk countries in appendix I  To address these objectives, we examined U S -funded projects and their implementers in four high-risk countries—Syria, Somalia, Haiti, and Kenya  We selected these countries based on factors including the high level of humanitarian assistance they received from U S  agencies, their higher propensity for the occurrence of financial crimes based on their inclusion on multiple financial-risk-related indices, and to obtain geographical diversity  More specifically, to identify our list of high-risk countries in terms of banking or financial risk, we used several indices including ones based on financial risk, money laundering risk, and counterterrorism-related risk  The indices we chose to use were State’s International Narcotics Control Strategy Report (2014- 2016) (Money Laundering Risks), the Department of the Treasury’s (Treasury) Office of Foreign Assets Control (OFAC) sanctions, the Organisation for Economic Co-operation and Development’s (OECD) Fragile State Index (2014-2016), the 2017 Financial Action Task Force (FATF) High Risk and Non- Cooperative Jurisdictions list, and the BASEL AML Index, 2017  We then identified 19 countries that appeared on at least two of the five lists and received at least $100 million in U S  based humanitarian assistance from 2012 through 2017, based on data from the United Nations Office for the Coordination of Humanitarian Affair’s financial tracking system  We then applied the following primary selection criteria to select our four countries: whether they (1) appeared on at least three of the five identified lists and (2) have received at least $100 million in U S  humanitarian assistance since 2012  Secondary considerations that informed our selection included whether a country had been identified as having banking access challenges by USAID, geographical diversity, and ensuring we had at least one country from each of the five indices we chose  The data we obtained for these four countries cannot be generalized beyond our selected projects and partners  For our first objective, to examine the extent to which implementing partners of State and USAID experienced banking access challenges that affected their implementation of humanitarian assistance projects, we conducted semi-structured interviews with 18 partners about (1) one of 18 specific projects we had selected in one of our high-risk countries and (2) their experiences implementing their global portfolio of humanitarian assistance projects over the previous 5 years  In order to determine our sample of partners, we selected a weighted, non-generalizable sample of 18 projects located in our four selected high-risk countries  We selected our projects from a list, provided by State and USAID, of 195 projects that were active as of the end of fiscal year 2017 in these countries  In making our selection of projects we made sure that our sample included a mix of projects from each country (7 projects for Syria, 5 for Somalia, 3 for Haiti, and 3 for Kenya), and a mix of State and USAID projects (3 State and 15 USAID)  We selected those numbers for each country and each agency based on the number of projects in each country and the proportion of assistance provided  We selected one State project in each of the three countries where they were active  Once we had determined these parameters for our non-generalizable sample, we made the final selections of the projects at random, making sure that we did not select more than one project for any one partner  Several of the implementing partners in our sample operate in over 100 countries in every part of the world, while a few operate in 20 or fewer countries  Three of the partners are United Nations organizations  The implementing partners in our sample had fiscal year 2016 annual revenues ranging from $5 9 billion to just over $10 million  We conducted semi-structured interviews with each of the 18 implementing partners on potential banking access challenges, such as the ability to open and maintain new accounts and make transfers in a timely fashion, and the effect of those challenges on project implementation  Our interviews were separated into two distinct sets of questions—one on banking access challenges the implementing partner encountered on the selected project, and the other on any banking access challenges the implementing partner encountered in its global portfolio of humanitarian assistance projects over the previous 5 years (2013-2017)  When discussing their global humanitarian assistance portfolios, the partners did not limit their responses to projects funded by U S  government agencies, but instead considered projects funded by all of their donors  We did not ask the partners to quantify the number of projects they had implemented over the previous 5 years, nor did we ask them to quantify the number of projects in their global portfolio of humanitarian assistance for which they had experienced banking access challenges  Our interview followed a protocol that asked both closed and open-ended questions  For most banking access challenges, when interview respondents indicated that their project or organization had experienced a banking access challenge, we probed for details of the challenge, including whether the challenge had caused an adverse effect on the project, such as project delays or cancellations  After the interviews had been conducted, we content-coded some of the open- ended answers we received  Specifically, we developed codes on whether any challenges reported had adversely affected the projects, the extent and duration of delays in transferring funds, and the extent and frequency of denials of international fund transfers  Two analysts independently coded each interview  The analysts then compared their coding and reconciled any initial disagreements  We also reviewed relevant studies on banking access challenges for NPOs conducted by the World Bank and the Charity and Security Network (CSN)  The study conducted by CSN included a survey that was designed to be generalizable to the population of all U S  NPOs with activities outside the U S , including providing humanitarian assistance  This survey received more than 300 responses, which constituted a reported response rate of about 38 percent  The researchers conducting the survey indicated that this response rate could be considered high for a public opinion telephone survey but low for a survey like the Census  The study determined the survey findings to be representative of the population with some qualifications, such as the fact that smaller organizations were more likely to complete the survey than larger organizations  The maximum margin of error was estimated to be 5 4 percent  More than 70 of the NPOs reported that they had received U S  government funding  We requested and received some additional data analysis from the researchers who had conducted this survey  We examined the aggregate survey responses in detail and compared them to the responses we received to our semi-structured interview questions, which probed into similar aspects of financial access  We reviewed documentation and interviewed the officials responsible for the survey and determined that they had used a reasonable methodology to conduct the survey  We also interviewed several NPOs and NPO groups that were not part of our sample to obtain their views on banking access challenges affecting those delivering humanitarian assistance  For our second objective, to examine USAID implementing partners’ reporting on banking access challenges, we reviewed the fiscal year 2017 progress reports, including quarterly, semi-annual, and annual reports, that USAID provided for our selected projects to determine if banking access challenges the implementing partners told us about in the interviews had been reported in accordance with requirements in the individual award agreements  In total, we reviewed 26 reports from these partners  We also interviewed USAID agreement officers for the projects that stated they had experienced banking access challenges about implementing partners’ reporting of those banking access challenges  To obtain a broader context, we also reviewed over 1300 USAID implementing partner reports for fiscal years 2016 and 2017 from a wider selection of high-risk countries to determine the extent to which banking access challenges are being reported to USAID  To identify the relevant USAID progress reports, we searched USAID’s Development Experience Clearinghouse (DEC) for all periodic progress reports filed for fiscal years 2016 and 2017 by implementing partners working in selected 19 high-risk countries for instances of reporting on financial access challenges  Using these criteria, we identified 1,369 reports from fiscal years 2016-2017 from our selected 19 high-risk countries  The reports included annual reports, final contractor / grantee reports, final evaluation reports, and periodical and periodic reports (such as quarterly or semi-annual reports)  The 1,369 reports constituted our universe of reports for which we used a textual analysis program to automatically scan and search for words and phrases that we identified in a lexicon of financial access terms  We developed this lexicon of financial access terms based on a review of relevant research, interviews with industry organizations, and a manual review of USAID progress reports  Using the lexicon, our textual analysis program identified all mentions of identified terms in the universe of reports  Next, two analysts independently reviewed the mentions identified through our textual analysis software program to determine whether the mentions actually constituted a reporting of a financial access challenge  The analysts then reconciled any differences in their reviews  For the purposes of this review, we considered a relevant financial access challenge to be any challenge encountered by the implementing partner in obtaining U S  banking services, or in transferring funds from the United States to the destination country  We did not conduct a similar review of State partner reporting because we only had a sample of three State projects and one of the projects did not require direct written reporting to State  In addition, State does not have a central depository for partner reports that we could search, such as USAID’s DEC  For our third objective, to examine actions relevant U S  agencies have taken to help address banking access challenges encountered by NPOs, we conducted interviews with and reviewed documentation from State, USAID, and Treasury on actions they have taken to help address these challenges  We also discussed U S  agency involvement in efforts to help address these challenges with relevant organizations that represent NPOs  In addition, we reviewed relevant documentation published by the World Bank and the Financial Action Task Force on actions they have taken to help address banking access challenges encountered by NPOs, and interviewed relevant staff at the World Bank on efforts undertaken to address banking access challenges  To examine the extent to which State and USAID encountered banking access challenges in providing assistance in high-risk countries, we interviewed State officials responsible for conducting overseas transfers of funds for both State and USAID to determine if any banking access challenges exist that are specific to our case study countries as well as for U S  assistance worldwide  We also interviewed State and USAID officials with responsibility for overseeing programs in our four selected countries to determine if they had seen any effects of banking access challenges  We focused primarily on these agencies’ ability to access banking services in the United States and on the transfer of funds to the ultimate destination  We conducted this performance audit from July 2017 to September 2018 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  The United States provides humanitarian assistance primarily through offices and bureaus within the Department of State (State) and the U S  Agency for International Development (USAID)  The primary humanitarian offices and bureau are: State’s Bureau of Population, Refugees, and Migration (PRM)  PRM’s stated mission is to provide protection, ease suffering, and resolve the plight of persecuted and uprooted people around the world by providing life-sustaining assistance, working through multilateral systems to build global partnerships, promoting best practices in humanitarian response, and ensuring that humanitarian principles are integrated into U S  foreign and national security policy  PRM does not operate refugee camps or give aid directly to refugees, but rather works with entities that operate these programs, including the United Nations, other international organizations, and nonprofit organizations  USAID’s Office of U S  Foreign Disaster Assistance (OFDA)  OFDA states that it helps countries prepare for, respond to, and recover from humanitarian crises  According to USAID, OFDA works with the international humanitarian community to give vulnerable populations resources to build resilience and strengthen their ability to respond to emergencies  Assistance includes provision of emergency relief supplies, establishing early warning systems, and training on search and rescue efforts, as well as programs to help victims of disasters recover  USAID’s Office of Food For Peace (FFP)  FFP’s stated mission is to partner with others to reduce hunger and malnutrition, and help ensure that all individuals have adequate, safe, and nutritious food to support a healthy and productive life  According to FFP, it works to mobilize resources to predict, prevent, and respond to hunger overseas  FFP’s emergency activities include food assistance to help reduce suffering and support the early recovery of people affected by conflict and natural disaster emergencies  In addition to the individual named above, Mona Sehgal (Assistant Director), Michael Maslowski (Analyst in Charge), Ming Chen, Debbie Chung, Martin de Alteriis, Leia Dickerson, Mark Dowling, Erin Guinn- Villareal, Chris Keblitis, and Benjamin L  Sponholtz made key contributions to this report 


Report 2:  Serbia, another CEFTA signatory, is also an important export market  Bosnia's major exports include vehicle seats, raw materials, leather products, textiles, energy, and wood products  The EU is also Bosnia's primary source of foreign direct investment (FDI)  In 2016, 63% of Bosnia's FDI came from EU countries, with Austria, Croatia, and Slovenia the top sources  Serbia is also a significant source of FDI (16 3%)  However, Bosnia's fragmented legal and administrative structure create a challenging investment climate  Many relevant laws differ between the two entities  Corruption, entrenched economic interests, and political instability also deter investment  As a result, FDI amounts to just 2% of Bosnia's GDP, well below the Western Balkan average of 5%  Bosnia was the region's lowest-rated country in the World Bank's 2019 Ease of Doing Business Index  U S  and EU policymakers view the NATO and EU accession processes as a positive force for democratization and reform in the Western Balkans, including Bosnia  According to analysts, this assessment informed the United States' partial retreat from the region in the 2000s and 2010s  EU membership is one of the few policy issues for which there is relatively broad consensus among Bosnia's politicians and population  The EU's "fundamentals first" approach to enlargement in the Western Balkans frontloads the accession process with meeting the core requirements of having a democratic political system and functioning market economy; in Bosnia, the EU is currently focused on issues relating to the rule of law, public administration reform, and economic development  In 2016, Bosnia submitted its application to join the EU  Its current status is potential candidate , which entitles it to receive financial assistance from the EU's Instrument for Pre-Accession Assistance II (IPA II)  Between 2014 and 2020, Bosnia is expected to receive €552 million in IPA II allocations, making the EU Bosnia's largest source of foreign assistance  Many EU member states provide additional aid to Bosnia through domestic foreign assistance programs  Bosnia's EU membership prospects are uncertain  In a 2018 progress report, the European Commission (the EU's executive) flagged Bosnia's slow implementation of reforms, including the 2015 Reform Agenda (a flagship EU initiative in Bosnia) and numerous domestic and international court rulings (see "Legal Challenges," above)  Some analysts question whether Bosnia, under its current political system, would be capable of meeting the membership requirement of harmonizing domestic legislation with the many thousands of provisions in the acquis communautaire, the cumulative body of EU legislation, case law, and regulations  In comparison to EU membership, Bosnian leaders are more divided over the issue of joining NATO  These divisions largely fall along Bosnian Serb and Bosnian Croat/Bosniak lines  Bosnian Serb opposition is rooted in resentment over NATO's role in the Bosnian war, and may also reflect a desire to remain in lockstep with neighboring Serbia, which also does not seek NATO membership  Bosnia joined NATO's Partnership for Peace in 2006 and secured an Individual Partnership Action Plan in 2008  In 2010, NATO indicated that it would launch a Membership Action Plan (MAP)—a program to help aspiring members meet membership requirements—once Bosnia meets several conditions, the most challenging of which is the reregistration of permanent defense installations from entity to state-level government  RS officials have resisted ceding control over defense installations on entity territory  Although Bosnia does not yet meet these requirements, in December 2018 NATO foreign ministers invited Bosnia to activate its MAP by submitting its first Annual National Program  Some analysts interpreted this invitation as a gesture to generate reform momentum in Bosnia's fragile post-election period  The Bosniak and Croat members of the presidency responded positively, but Bosnian Serb leaders (and most Bosnian Serbs) do not want Bosnia to join NATO  In October 2017, the RS National Assembly passed a resolution supporting military neutrality  RS President Željka Cvijanović reiterated this stance after NATO's invitation, and Dodik—now a member of the state-level presidency—also has vowed to pursue military neutrality  Bosnia's relations with Croatia and Serbia are seen as an important component of regional stability  However, bilateral relations have often been fraught as a legacy of the Bosnian war, as well as sensitivities over Croatia and Serbia's relations with Bosnian Croats and Serbs  While democratic gains in Croatia and Serbia after 2000 contributed to improved relations with Bosnia, they remain reluctant to examine or acknowledge their role in the Bosnian war  At times, Bosnian leaders have objected to what they describe as Croatian and Serbian meddling in Bosnia's affairs  Ex-Bosnian Croat member of the presidency Dragan Čović and current Bosnian Serb member of the presidency Milorad Dodik draw support from leaders in Croatia and Serbia and reportedly hold Croatian and Serbian citizenship, respectively, alongside their Bosnian citizenship  The Croatian government financially and politically backed Čović in Bosnia's 2018 elections, and Croatian politicians have raised the issue of Bosnian Croats' constitutional challenges (see above, "Legal Challenges") in forums like the European Parliament, NATO, and the United Nations  These moves prompted three former High Representatives to Bosnia to issue a joint letter expressing alarm over Croatia's "meddling" in Bosnia's internal affairs  The Croatian government also challenged the legitimacy of Željko Komšić as the Croat member of the Bosnian presidency (see above, "2018 General Election")  Some parties in Croatia hold Croatian election campaign events on Bosnian territory to mobilize Bosnian Croat voters with dual citizenship to vote in Croatia's elections  The Serbian government likewise supports Dodik, who is a frequent visitor to Belgrade  Some Serbian politicians have made statements supporting convicted Bosnian Serb war criminals, inflaming an issue that remains highly sensitive in Bosnia  Bosnia and Serbia have an unresolved demarcation dispute over approximately 40 square kilometers of border area, including a railway segment and hydroelectric power stations  Bosnia has dual citizenship treaties with Croatia and Serbia, resulting in hundreds of thousands of Bosnian Croats and Bosnian Serbs acquiring dual citizenship  This has raised jurisdictional issues in cases in which indicted war criminals hold dual citizenship  Despite occasional tensions in their relations, Croatia and Serbia are important economic partners for Bosnia  Both countries are among Bosnia's top export markets and top sources of FDI  As part of its enlargement strategy in the Western Balkans, the EU has embraced a connectivity agenda to improve regional transportation, energy, and infrastructural linkages, reserving up to €1 billion in grants for projects for the period 2015-2020  Officials believe that improved connectivity could benefit bilateral relations and contribute to regional stability  Given its strategic location and relatively small, weak states, the Balkan region has long drawn in more powerful states  Many analysts maintain that as the United States and the European Union have both scaled back their presence in the Balkans to address other issues since the late 2000s, Russia, Turkey, and China partly filled the vacuum  U S  and EU officials have expressed concern over Russian influence in the Western Balkans, particularly after Russia occupied Ukraine's Crimea region in 2014  Many analysts maintain that Russia does not have a grand strategy in the Western Balkans, but rather aims to prevent Euro-Atlantic integration and shore up its claims to great power status by asserting itself in the EU's "inner courtyard " Analysts have identified several Russian tools in the region, including playing a "spoiler" role, projecting soft power, and leveraging energy dominance  Observers contend that Russia plays a "spoiler" role in Bosnia by exacerbating ethnic divisions, backing illiberal or anti-Western political factions, and helping to militarize RS  They claim that these actions help sustain the dysfunction and gridlock that undermine Bosnia's Euro-Atlantic reform efforts  Russia has supported Bosnian Serb and Bosnian Croat nationalist leaders Milorad Dodik and Dragan Čović  Dodik's meeting with Russian President Vladimir Putin just before Bosnia's October 7, 2018 general election was one of nearly ten meetings between the two over the past three years, signaling high-level Russian support  Many experts assert that Russia has been a key ally to Dodik in resisting Western pressure to cooperate on reforms  Moscow has also supported divisive RS policies  When Dodik violated a Bosnian Constitutional Court ruling in 2016 by holding a referendum to establish a controversial "Statehood Day," Russia stood apart from the High Representative and Western diplomats by supporting the initiative  More recently, Russia stated its support for RS's controversial Srebrenica commission (see above)  Analysts have also expressed concern at Russia's apparent support for Čović, who has advocated greater autonomy for Croats and the creation of a third Croat entity  Some analysts have expressed concern at Russia's role in RS's security sector  Russian forces have trained RS police special forces on counterterrorism and intelligence  Some observers believe that these exercises contribute to militarization in RS, potentially pushing the police force beyond its civilian law enforcement mandate  Analysts caution that militarization could increase the scale of violence in any confrontation between RS and the Bosnian government  Some Bosnian Serb ultranationalist and veterans groups have fought alongside pro-Russia combatants in Ukraine, and analysts believe they could be mobilized to support RS leaders as well  Russian soft power draws upon religious and cultural kinship with Bosnian Serbs, as well as Russia's history of support during the wars of Yugoslav disintegration  Kremlin-linked media, like Sputnik and RT , amplify existing anti-Western narratives and positively shape public opinion toward Russia  Some local media further propagate Sputnik and RT articles  A 2018 National Democratic Institute media study found that RS media stories about Russia were overwhelmingly positive, while the tone of most stories about the United States and NATO was negative  Pro-Russian media glorifies the Russian military, highlights cultural and religious links between Serbs and Russians, and documents high-level meetings between RS and Russian officials  Economic relations between Russia and RS have deepened in recent years  Russia is the largest source of FDI in RS, and it is largely concentrated in the energy sector  In 2007, Russian state-owned oil company Zarubezhneft bought RS's Bosanski Brod oil refinery, motor oil processing facilities in nearby Modrica, and retailer Banjaluka Petrol  Some analysts believe that these assets—which were purchased without an open tender—give Zarubezhneft influence in RS  In addition to being an important employer, Zarubezhneft is RS's biggest taxpayer; its value-added tax and excise duty contributions reportedly account for 25% of RS budget revenue  Bosnia depends upon Russian natural gas imports via Ukraine  Energy policy is vested in the entities, and Russian natural gas provider Gazprom reportedly has used its market dominance to pit the two entities against one another and undermine projects that would diversify supplies  Many analysts believe that Turkey's influence in Bosnia has increased over the last two decades due to Ankara's close relationship with Bosniak leaders  Some Turkish officials reportedly view Bosnia as a natural sphere of influence given geographic and historical connections  Observers note that Turkish President Recep Tayyip Erdogan has at times invoked Ottoman-era ties to Bosnia and religious kinship with Bosniaks as soft power tools  Turkish influence in Bosnia has expanded since Yugoslavia's collapse  During the 1992-1995 war, Turkey gained prestige among Bosniaks by condemning the international arms embargo against Bosnia, arguing that it prevented Bosniaks from defending themselves  Turkey, as well as other predominantly Muslim countries like Iran and Saudi Arabia, reportedly supplied Bosniak forces with arms  Turkish influence has continued since the war's end  Bosnia is one of the top recipients of Turkish Cooperation and Coordination Agency assistance; much of this support is earmarked for projects to restore Ottoman-era buildings and monuments  A Turkish Cultural Center was established in Bosnia in 2003, and in 2009 the Yunus Emre Foundation, an NGO founded by the Turkish government, opened an office in Sarajevo to promote Turkish language and culture  Turkey has popular support among Bosniaks  In a 2018 International Republican Institute survey, 76% of Bosniak respondents had positive views of Turkey—the strongest support among Bosniaks for any foreign state  Many Bosnian Croats and Bosnian Serbs look to Croatia and Serbia as external protectors, and some analysts believe that Turkey has attempted to establish a similar role for itself vis-à-vis Bosniaks  Observers contend that Erdogan's ruling party has particularly strong ties to the largest Bosniak ethnic party, the SDA  Erdogan and Turkish state-owned media openly supported SDA candidate Bakir Izetbegović in his bid for the Bosniak seat on the presidency in 2014  Some observers believe that Izetbegović's clout within the SDA rests in part on his support from Erdogan  Economic relations between Bosnia and Turkey have deepened in recent years  Turkish FDI in Bosnia accounted for 5 6% of FDI flows in 2016  One notable project is a highway to connect Sarajevo to Belgrade, Serbia  After years of disagreement, Bosnian officials approved the route in February 2019  Turkey is expected to provide funding for some of the expected €3 billion in costs, although the terms of the contract are not yet resolved  Some officials, including French President Emmanuel Macron, have expressed concern over Turkey's alleged ambitions as part of broader EU concern over external influence in the Balkans  However, analysts caution that Turkey's ambitions and capabilities in the Balkans may be overstated  They note that the scope of Turkish investment is sometimes exaggerated in the media, and that proposed projects do not always come to fruition  While Russian and Turkish influence in Bosnia relies in part on soft power, China's presence in Bosnia is primarily economic  Between 2011 and 2019, Chinese investments in Bosnia amounted to an estimated $3 6 billion, primarily in the form of direct lending for energy and transportation projects  Chinese firms have contracts to construct or expand energy plants, including a €350 million loan to construct a coal-fired plant in Stanari, RS  A €1 4 billion deal was signed to construct a highway between Banja Luka and Mlinište  In March 2019, the EU Energy Community criticized the FBiH entity government's decision to guarantee a €600 million loan from China's Exim Bank to build a coal-fired power plant in Tuzla  However, some analysts caution that China's economic influence in Bosnia may be overstated at present  While China's pledged investments in high-visibility projects garner media attention, the actual amount of Chinese FDI is far less than that of the EU  Moreover, many pledged projects do not come to fruition  Nevertheless, EU and U S  officials have voiced concern over the scope of China's investments in the Balkans, as well as Chinese lending practices  Chinese loans often require recipient state governments to assume the loan burden, potentially leading to high external debt  The EU has also raised concerns that Chinese lending practices violate EU rules in public procurement because they frequently require use of Chinese contractors, laborers, or supplies  In contrast to EU funds, which are partly designed to spur reform, Chinese loans have few conditions and rules linked to transparency or reform  Finally, EU officials have expressed concern that China's economic might could be a source of leverage over recipient states that are candidates or potential candidates for EU membership and thus impede the EU's ability to speak with one voice on relations with China if they do become members  Bosnia was not a core transit country in the "Balkan Route" that hundreds of thousands of migrants and refugees followed in an attempt to reach the EU during heightened flows in 2015 and early 2016  However, recent route shifts have brought more migrant and refugee traffic through Bosnia  Since early 2018, an estimated 23,000 migrants and refugees have entered Bosnia; approximately 25% of them remain in the country  Most of them hope to enter EU territory via Bosnia's neighbor, Croatia, and from there move on and enter the EU's visa- and passport-free Schengen Area  However, the Croatian government has expanded border policing, and apprehended individuals are sent back to Bosnia  The EU provided €2 million in 2018 to help Bosnia respond to the crisis and provide shelter to migrants and refugees who are effectively stranded in Bosnia  The migration crisis has triggered a backlash from some Bosnians, particularly in Una-Sana Canton, which borders Croatia and has the highest concentration of migrants and refugees  Some residents of Bihać, Una-Sana's administrative center, protested against camps situated in their municipality in October 2018, while local authorities in Velika Kladuša, another city in the canton, reportedly obstructed the Ministry of Security's plans to house migrants in a local building  The incident illustrates local backlash as well as the state-level government's difficulty enforcing its decisions, even when it has jurisdiction  Islam was introduced to part of Bosnia's population during Ottoman rule  In socialist Yugoslavia, the semi-official Islamic Religious Community played a key role in religious affairs, including legal rulings and religious education  It was renamed the Islamic Community of Bosnia and Herzegovina in 1992, and remains an important religious institution  Islamic tradition in the Balkans, including Bosnia, is generally moderate and secular  The majority of Bosnia's practicing Muslims follow the Hanafi school of Sunni Islam  However, some analysts have expressed concern over the emergence of groups influenced or funded by state and non-state entities in the Arab Gulf states, where more conservative Hanbali Sunni practices are common  Aid workers, missionaries, and "mujahedeen" fighters from the Gulf States promoted transnational Islamist militancy and Salafist Hanbali religious doctrine during Bosnia's 1992-1995 war; Iran's government also supported Bosniak leaders and forces  After the war, Saudi Arabia provided an estimated $600 million in aid to repair and build hundreds of mosques and establish schools and cultural centers that promote socially conservative Sunni views  Iran has also maintained active cultural outreach and other ties to some Bosnian Muslims  Many analysts contend that Salafi groups have limited support in Bosnia because of the traditionally high level of secularism among Bosnian Muslims  They also note that few Bosnian Muslims who subscribe to Salafist ideas and practices have violent intentions, and many of them live in remote rural communities  While most of these groups were not originally affiliated with official religious organizations in Bosnia, the Grand Mufti of Bosnia's Islamic Community exerted pressure on them to acknowledge his authority and his right to monitor religious content  As a result, an estimated 90% of Salafi groups were brought under official structures  Nevertheless, some experts caution that radicalized groups and individuals may pose a terrorist threat despite their small numbers  Radicalized Muslims were implicated in the bombing of a police station in Bugojno in 2010 and a lone-gunman attack on the U S  Embassy in Sarajevo in 2011  The Islamic State (IS) and Nusra Front's gains in Syria and Iraq in the 2010s altered the dynamic of the terrorism threat in Bosnia and broadened the use of social media in recruitment  Between 2012 and 2017, an estimated 350 Bosnian citizens traveled from Bosnia or Bosnian diaspora communities to fight with armed groups in Iraq and Syria  More recently, returned foreign fighters are seen as a potential threat as the position of the IS and other armed groups has weakened  Bosnia's stock of illegal weapons, mines, and explosives may exacerbate the risk posed by returnees  As of December 2017, officials believed that just over 100 Bosnians remained in Syria (including women and children), roughly 50 had returned to Bosnia, and 70 had been killed in the conflict  In 2014, the Bosnian government introduced new criminal offenses to prosecute foreign terrorist fighters and recruiters  Several dozen returned fighters and domestic recruiters have been convicted of these offenses  While the U S  State Department describes Bosnia as a "cooperative counterterrorism partner," it warns that Bosnia's political fragmentation and dysfunction could undermine counterterrorism efforts  For example, in 2017 several ministries proposed new measures to tighten counterterrorism efforts; however, they were not enacted due to political gridlock in state-level and FBiH governments  Initially viewed as a "European problem," the Bosnian conflict eventually helped shape the post-Cold War role of the United States and NATO in European security  When the United States assumed greater responsibilities in resolving the conflict, its role was considerable: leading NATO airstrikes, garnering diplomatic support from Russia and European allies, persuading warring parties to agree to a ceasefire, brokering the Dayton Peace Agreement, and deploying 20,000 troops to Bosnia  According to Richard Holbrooke, the U S  official who brokered the talks, the Bosnian war was a pivotal period in U S  foreign policy in Europe: "The three main pillars of [policy]—U S -Russian relations, NATO enlargement into Central Europe, and Bosnia—had often worked against each other  Now they reinforced each other: NATO sent its forces out of area for the first time in its history, and Russian troops, under an American commander, were deployed alongside them " Some analysts and policymakers believe that the United States' strong hand in resolving the conflict and in shaping Bosnia's political system have made it a stakeholder in Bosnia's future  U S  officials, often in cooperation with the EU, have intervened to defuse crises and broker reform talks  The United States also has imposed sanctions against Bosnian officials: in addition to Dodik (see above), the U S  State Department publicly designated Bosnian Serb politician Nikola Špirić (Dodik's associate) for "significant corruption or gross violation of human rights " U S  policymakers attach strategic importance to Bosnia's stability; many analysts believe turbulence in Bosnia could reverberate in the Balkans and potentially draw in Croatia and Serbia, while instability in other parts of the region could spill over into Bosnia  When the Trump Administration indicated in 2018 that it would consider supporting a potential Serbia-Kosovo agreement to "adjust borders" between the two—a major break with the long-standing EU and U S  policy to oppose redrawing borders in the Balkans along ethnic lines—some analysts expressed concern that the Administration could reshape long-standing U S  policy toward Bosnia  However, the new U S  Ambassador to Bosnia stated in February 2019 that the U S  will continue to be "guarantor of Bosnia and Herzegovina's sovereignty and territorial integrity " On the other hand, many observers also note that U S  engagement in Bosnia (and the Western Balkans) decreased under the administrations of President George W  Bush and President Barack Obama  During this time U S  policymakers turned their focus to geopolitical crises and challenges in other parts of the globe while ceding the regional lead to the EU  Indeed, some analysts have urged the United States to assume a greater role in Bosnia, arguing that Bosnia's current crises warrant it, and that the EU and the United States are more effective in the region when they work together  Congressional interest in Bosnia dates back to the 1992-1995 war  Many Members featured prominently in foreign policy debates over U S  intervention in the conflict  In 2015, the House passed a resolution describing the Srebrenica massacres as a genocide and urging the United States to continue to support Bosnia's territorial integrity ( H Res  310 , 114 th Congress)  In the 114 th and 115 th Congresses, a bill was introduced in the Senate to establish an enterprise fund to promote economic development and the private sector in Bosnia ( S  2307 and S  864 )  In April 2018, the House Foreign Affairs Committee's Subcommittee on Europe, Eurasia, and Emerging Threats held a hearing on Bosnia's prospects ahead of its October 2018 elections  Congress's engagement with Bosnia also continues within the broader context of policy concern over the external influence of China, Turkey, and Russia in the Western Balkans and energy security  As a potential candidate for EU membership and NATO partner, Bosnia is eligible for assistance through the Countering Russian Influence Funds under the Countering America's Adversaries Through Sanctions Act (CAATSA) enacted in 2017 ( P L  115-44 )  Through congressionally approved (and sometimes expanded) foreign assistance appropriations, Bosnia has received more than $2 billion in aid since 1995  Between 1996 and 1999, the United States pledged $1 billion of the $4 billion international commitment to implementing Dayton's civilian provisions and helping to rebuild Bosnia  The cost of U S  military operations in Bosnia since 1992 is estimated at more than $10 billion ( Appendix I )  Bosnia continues to receive U S  foreign assistance, although the amount has decreased in recent years  Assistance to Bosnia in FY2015 and FY2016 was approximately $33 million each year  In FY2017, it was $53 5 million, and $41 5 million in FY2018  The Administration requested $21 million for FY2019 and $16 9 million for FY2020  Nearly 25 years after the Dayton Peace Agreement, Bosnia faces many challenges  In considering U S  relations with Bosnia, Members of Congress may consider the following questions: How can the United States encourage Bosnia's government to incorporate the legal rulings of the Bosnian Constitutional Court and the European Court of Human Rights into election legislation and the constitution? How can U S  foreign assistance be used to counter Russian influence in Republika Srpska, in particular Russia's close ties to Bosnian Serb politicians and its use of local media and Sputnik to amplify anti-U S  narratives and project pro-Russia soft power? What are the implications of potential militarization in Republika Srpska? How can the United States effectively address this alleged trend? How can the United States support a successful reform initiative that secures transparency and accountability, and facilitates a political community in which politicians and voters are committed to the Bosnian state and socioeconomic challenges that transcend all three ethnic groups? Can the Germany-U K  initiative from 2015 be revived, or is it better to start from scratch? Are the approximately 600 troops in the European Union Force mission in Bosnia sufficient to stabilize Bosnia if violence breaks out? If Serbia and Kosovo agree to normalize relations by redrawing their borders, how can U S  policymakers prevent this development from destabilizing Bosnia, particularly given Milorad Dodik's threats to seek RS secession if Kosovo is "partitioned"? How can the United States encourage Croatia and Serbia to engage in Bosnia in a manner that helps bridge ethnic divisions and contributes to Bosnia's territorial integrity and sovereignty? Given the pervasiveness of corruption in Bosnia, how can U S  assistance most effectively be used to counter it? Does foreign assistance contribute to civic groups and independent media that could serve as a check against corruption? 

ground_truth: Bosnia and Herzegovina (hereafter, "Bosnia") drew heavily on U.S. support after gaining independence from Yugoslavia in 1992. The United States helped end the Bosnian war (1992-1995), one of the most lethal conflicts in Europe since the Second World War, by leading NATO airstrikes against Bosnian Serb forces, brokering the Dayton Peace Agreement in 1995, and deploying 20,000 U.S. troops. Some Members of Congress became involved in policy debates over these measures, and Congress monitored and at times challenged the Bush and Clinton Administrations' response through numerous hearings, resolutions, and legislative proposals. Since 1995, the United States has been a major source of aid to Bosnia and firmly supports its territorial integrity. The United States also supports Bosnia's aspirations for NATO and European Union (EU) membership. Today, Bosnia faces serious challenges. Nearly 25 years after the Dayton Agreement, Bosnia continues to use part of the Agreement as its constitution, which divides the country into two ethnoterritorial entities. Critics charge that Bosnia's political system is too decentralized to enact the reforms required for NATO and EU membership. They also contend that the ethnic power-sharing arrangements and veto points embedded in numerous government bodies are sources of gridlock. Domestic and international courts have ruled against several aspects of Bosnia's constitution, yet the Bosnian government thus far has failed to implement these rulings. Since Bosnia's independence, its politics has been dominated by ethnic parties representing the country's three main groups: Bosniaks (Slavic Muslims), Croats, and Serbs. These parties have prospered under a system that critics charge lacks transparency and accountability. Critics also maintain that ethnic party leaders use divisive nationalist rhetoric to distract from serious issues affecting the country as a whole, including poverty, unemployment, and stalled political reforms. The Bosnian population exhibits low trust in political parties and the government, and disaffection toward the country's elite. U.S. and EU officials brokered several ultimately unsuccessful rounds of constitutional reform negotiations, and continue to call on Bosnia's leaders to implement reforms to make governance more efficient and effective, dismantle patronage networks, and bring Bosnia closer to EU and NATO membership. However, there is little consensus among the country's leaders on how the country should be reformed. Bosnian Serb leaders from the Serb-majority entity (Republika Srpska) have called for greater autonomy and even secession from Bosnia. Some Bosnian Croat leaders have called for partitioning Bosnia's other entity, the Federation of Bosnia and Herzegovina, to create a separate Croat-majority entity. Bosniak leaders, by contrast, generally prefer a more centralized state. Many analysts caution that any move to partition the country could lead to renewed violence, while greater decentralization could make Bosnia's government less functional. U.S. policy has long been oriented toward preserving Bosnia's statehood. Bosnia's 2018 general elections largely returned to power the same entrenched ethnic parties. Of particular concern is the election of Bosnian Serb leader Milorad Dodik to Bosnia's collective presidency. Dodik, a sharp critic of the United States and NATO, has periodically called for a referendum on Republika Srpska's secession. He is under U.S. sanctions for obstructing the Dayton Agreement. In addition to these internal challenges, U.S. and EU officials have expressed concern over external influence in the region. Russia reportedly relies on soft power, energy leverage, and "spoiler" tactics to influence Bosnia, particularly in the Serb-majority entity. Turkish soft power draws on Bosnia's Ottoman-era heritage and Turkey's shared religious tradition with Bosniaks. China is a more recent presence in the region, but its heavy investments and lending have prompted concern on both sides of the Atlantic. Policymakers have also expressed concern at the challenges posed by the return of Bosnians who fought with the Islamic State and Nusra Front in Syria and Iraq. Many observers contend that the United States remains a stakeholder in Bosnia's future because of its central role in resolving the conflict and shaping the postwar Bosnian state. Given the history of U.S. involvement in Bosnia, Bosnia's importance to regional stability in the Balkans, and concerns over Russian and Chinese influence in Bosnia, Members of Congress may be interested in monitoring how the country navigates its internal and external challenges. Congress may also consider future U.S. aid levels to Bosnia and the degree to which such assistance supports the long-standing U.S. policy objectives for Bosnia of territorial integrity, NATO and EU integration, energy security, and resilience against malign influence.