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



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

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: Cluster munitions are weapons that open in mid-air and disperse smaller submunitions—anywhere from a few dozen to hundreds—into an area  They can be delivered by aircraft or from ground systems such as artillery, rockets, and missiles  Cluster munitions are valued militarily because one munition can kill or destroy many targets within its impact area, and fewer weapons systems are needed to deliver fewer munitions to attack multiple targets  Cluster munitions also permit a smaller force to engage a larger adversary and are considered by some an "economy of force" weapon  Many cluster munitions rely on simple mechanical fuzes that arm the submunition based on its rate of spin and explode on impact or after a time delay  A newer generation of sensor-fuzed submunitions is being introduced by a number of nations to improve the munitions' and submunitions' accuracy and to reduce the large number of residual unexploded submunitions  These sensor-fuzed submunitions are designed to sense and destroy vehicles without creating an extensive hazard area of unexploded submunitions  Cluster bombs were first used in World War II, and inclusive of their debut, cluster munitions have been used in at least 21 states by at least 13 different countries  Cluster munitions were used extensively in Southeast Asia by the United States in the 1960s and 1970s, and the International Committee of the Red Cross (ICRC) estimates that in Laos alone, 9 million to 27 million unexploded submunitions remained after the conflict, resulting in over 10,000 civilian casualties to date  Cluster munitions were used by the Soviets in Afghanistan, by the British in the Falklands, by the Coalition in the Gulf War, and by the warring factions in Yugoslavia  In Kosovo and Yugoslavia in 1999, NATO forces dropped 1,765 cluster bombs containing approximately 295,000 submunitions  From 2001 through 2002, the United States dropped 1,228 cluster bombs containing 248,056 submunitions in Afghanistan, and U S  and British forces used almost 13,000 cluster munitions containing an estimated 1 8 million to 2 million submunitions during the first three weeks of combat in Iraq in 2003  Senior U S  government officials have stated that the United States has not used cluster munitions since 2003, during the intervention in Iraq  It is widely believed that confusion over U S  cluster submunitions (BLU-97/B) that were the same color and size as air-dropped humanitarian food packets played a major role in the U S  decision to suspend cluster munitions use in Afghanistan but not before using them in Iraq  In 2006, Israeli use of cluster munitions against Hezbollah forces in Lebanon resulted in widespread international criticism  Israel was said to have fired significant quantities of cluster munitions—primarily during the last 3 days of the 34-day war after a U N  cease-fire deal had been agreed to —resulting in almost 1 million unexploded cluster bomblets to which the U N  attributed 14 deaths during the conflict  Reports maintain that Hezbollah fired about 113 "cluster rockets" at northern Israel and, in turn, Israel's use of cluster munitions supposedly affected 26% of southern Lebanon's arable land and contaminated about 13 square miles with unexploded submunitions  One report states that there was a failure rate of upward of 70% of Israel's cluster weapons  The fundamental criticisms of cluster munitions are that they disperse large numbers of submunitions imprecisely over an extended area, that they frequently fail to detonate and are difficult to detect, and that submunitions can remain explosive hazards for decades  Civilian casualties are primarily caused by munitions being fired into areas where soldiers and civilians are intermixed, inaccurate cluster munitions landing in populated areas, or civilians traversing areas where cluster munitions have been employed but failed to explode  Two technical characteristics of submunitions—failure rate and lack of a self-destruct capability—have received a great deal of attention  There appear to be significant discrepancies among failure rate estimates  Some manufacturers claim a submunition failure rate of 2% to 5%, whereas mine clearance specialists have frequently reported failure rates of 10% to 30%  A number of factors influence submunition reliability  These include delivery technique, age of the submunition, air temperature, landing in soft or muddy ground, getting caught in trees and vegetation, and submunitions being damaged after dispersal, or landing in such a manner that their impact fuzes fail to initiate  Submunitions lacking a self-destruct capability—referred to as "dumb" munitions—are of particular concern because they can remain a hazard for decades, thereby increasing the potential for civilian casualties  Some nations are developing "smart" or sensor-fuzed weapons with greater reliability and a variety of self-destruct mechanisms intended to address the residual hazard of submunitions  Experts maintain that self-destruct features reduce—but do not eliminate—the unexploded ordnance problem caused by cluster munitions and that the advantage gained by using "smart" cluster munitions is negated when high-failure rate and/or "dumb" cluster munitions are used in the same area  For some nations, replacing "dumb" and high-failure rate cluster munitions may not be an option—China, Russia, and the Republic of Korea maintain that they cannot afford to replace all current submunitions with "smart" submunitions  In an effort to restrict or ban specific types of weapons used in armed conflicts, 51 states negotiated the CCW in 1980  When the treaty entered into force in December 1983, it applied only to incendiary weapons, mines and booby-traps, and weapons intended to cause casualties through very small fragments  Since then, some states-parties have added provisions through additional protocols to address other types of weapons  Acting in accordance with the recommendation of a group of experts established during the 2006 CCW review conference, states-parties to the convention decided in 2007 to "negotiate a proposal to address urgently the humanitarian impact of cluster munitions " Negotiations took place in 2008 and 2009, but the parties have not reached agreement on a new proposal  The experts group continued negotiations in 2011 "informed by" a Draft Protocol on Cluster Munitions  However, the CCW states-parties were unable to reach agreement on a protocol during their November 2011 review conference  Described as "frustrated with the CCW process," a number of CCW members—led by Norway—initiated negotiations in 2007 outside of the CCW to ban cluster munitions  On May 30, 2008, they reached an agreement to ban cluster munitions  The United States, Russia, China, Israel, Egypt, India, and Pakistan did not participate in the talks or sign the agreement  During the Signing Conference in Oslo on December 3-4, 2008, 94 states signed the convention and 4 of the signatories ratified the convention at the same time  China, Russia, and the United States did not sign the convention, but France, Germany, and the United Kingdom were among the 18 NATO members to do so  The convention was to enter into force six months after the deposit of the 30 th ratification  The United Nations received the 30 th ratification on February 16, 2010, and the convention entered into force on August 1, 2010  As of January 2, 2019, 105 states were party to the convention  The Convention on Cluster Munitions (CCM), inter alia, bans the use of cluster munitions, as well as their development, production, acquisition, transfer, and stockpiling  The convention does not prohibit cluster munitions that can detect and engage a single target or explosive submunitions equipped with an electronic self-destruction or self-deactivating feature —an exemption that seemingly permits sensor-fuzed or "smart" cluster submunitions  U S  officials were concerned that early versions of the CCM would prevent military forces from non-states-parties from providing humanitarian and peacekeeping support and significantly affect NATO military operations, but the version signed May 30, 2008, does permit states-parties to engage in military cooperation and operations with non-states-parties (Article 21, Paragraph 3)  Then-Acting Assistant Secretary for Political-Military Affairs Stephen Mull stated in May 2008 that the United States relies on cluster munitions "as an important part of our own defense strategy," and that Washington's preferred alternative to a ban is "to pursue technological fixes that will make sure that these weapons are no longer viable once the conflict is over " U S  officials note that Cluster munitions are available for use by every combat aircraft in the U S  inventory, they are integral to every Army or Marine maneuver element and in some cases constitute up to 50 percent of tactical indirect fire support  U S  forces simply can not fight by design or by doctrine without holding out at least the possibility of using cluster munitions  The United States also maintains that using cluster munitions reduces the number of aircraft and artillery systems needed to support military operations, and that if cluster munitions were eliminated, significantly more money would need to be spent on new weapons systems, ammunition, and logistical resources  Officials further suggest that if cluster munitions were eliminated, most militaries would increase their use of massed artillery and rocket barrages, which would likely increase destruction of key infrastructure  Then-Department of State Legal Adviser Harold Koh stated November 9, 2009, that the United States has determined that its "national security interests cannot be fully ensured consistent with the terms" of the CCM  The Barack Obama Administration announced on November 25, 2011, that the United States would continue to implement the DOD policy on cluster munitions issued June 19, 2008, which recognized the need to minimize harm to civilians and infrastructure but also reaffirmed that "cluster munitions are legitimate weapons with clear military utility " The central directive in the Pentagon's policy was the unwaiverable requirement that cluster munitions used after 2018 must leave less than 1% of unexploded submunitions on the battlefield  Prior to that deadline, U S  use of cluster munitions that did not meet this criterion required combatant commander approval  On November 30, 2017, then-Deputy Secretary of Defense Patrick Shanahan issued a revised policy on cluster munitions  The memorandum describing the policy noted that [c]luster munitions provide the Joint Force with an effective and necessary capability to engage area targets, including massed formations of enemy forces, individual targets dispersed over a defined area, targets whose precise location are not known, and time-sensitive or moving targets  Cluster munitions are legitimate weapons with clear military utility, as they provide distinct advantages against a range of threats in the operating environment  Additionally, the use of cluster munitions may result in less collateral damage than the collateral damage that results from use of unitary munitions alone  Since the inception of the 2008 policy, in the midst of extended combat operations in Iraq and Afghanistan, we have witnessed important changes in the global security environment and experienced several years of budgets that under-invested in replacement systems and the modernization of the Joint Force more broadly  Our adversaries and our potential adversaries have developed advanced capabilities and operational approaches specifically designed to limit our ability to project power  Both Shanahan and Admiral Harry Harris Jr  have also argued that sustaining the current U S  cluster munitions arsenal is necessary to prepare for a potential conflict with North Korea  The revised policy reverses the 2008 policy that established an unwaiverable requirement that cluster munitions used after 2018 must leave less than 1% of unexploded submunitions on the battlefield  Combatant commanders can use cluster munitions that do not meet the 1% or less unexploded submunitions standard in extreme situations to meet immediate warfighting demands  Furthermore, the new policy does not establish a deadline to replace cluster munitions exceeding the 1% rate, and these munitions will be removed only after new munitions that meet the 1% or less unexploded submunitions standard are fielded in sufficient quantities to meet combatant commander requirements  However, the new DOD policy stipulates that the department "will only procure cluster munitions containing submunitions or submunition warheads" meeting the 2008 UXO requirement or possessing "advanced features to minimize the risks posed by unexploded submunitions " Specifically, DOD's revised policy stipulates the following: Continuing or beginning with their respective FY2019 budgets, the military departments will program for capabilities to replace cluster munitions currently in active inventories that do not meet the above-described standards for procuring new cluster munitions  The department's annual Program and Budget Review will be used to assess the sufficiency of the replacement efforts  The department's operational planners should plan for the availability of cluster munitions  The approval authority to employ cluster munitions that do not meet the standards prescribed by this policy for procuring new cluster munitions, however, rests with the combatant commanders  In accordance with their existing authorities, commanders may use cluster munitions that meet the standards prescribed by this policy for procuring new cluster munitions  The military departments and combatant commands, in keeping with U S  legal obligations under CCW Protocol V on Explosive Remnants of War and consistent with past practices, will continue to record and retain information on the use of cluster munitions and provide relevant information to facilitate the removal or destruction of unexploded submunitions  The military departments and combatant commands will maintain sufficient inventories and a robust stockpile surveillance program to ensure operational quality and reliability of cluster munitions  In extremis, to meet immediate warfighting demand, combatant commanders may accept transfers of cluster munitions that do not meet the above-described cluster-munition procurement standards  Cluster munitions that do not meet the standards prescribed by this policy for procuring new cluster munitions will be removed from active inventories and demilitarized after their capabilities have been replaced by sufficient quantities of munitions that meet the standards in this policy  The department will not transfer cluster munitions except as provided for under U S  law  The operational use of cluster munitions that include Anti-Personnel Landmines (APL) submunitions shall comply with presidential policy  Furthermore, the Deputy Secretary of Defense Expect(s) the Department to achieve the goals in this policy as rapidly as industry can support  Combatant Commanders will continue to ensure that the employment of cluster munitions is consistent with the law of war and applicable international agreements in order to minimize their harmful effects on civilian populations and infrastructure  In developing a new generation of cluster munitions less dangerous to civilians, DOD will need to determine whether such a high level of performance is achievable under both controlled laboratory conditions and real-world conditions  Factors such as delivery technique, landing in soft or muddy ground, getting caught in trees and vegetation, and submunitions being damaged after dispersal or landing could result in an appreciable number of dud submunitions, even if they have a self-deactivation feature  DOD and the services have been and are currently involved in efforts to reduce cluster munitions failure rates  The Army's Alternative Warhead Program (AWP) is intended to assess and recommend new technologies to reduce or eliminate cluster munitions failure rates  The AWP program is viewed as particularly relevant, as the Pentagon estimates that "upward of 80 percent of U S  cluster munitions reside in the Army artillery stockpile " In December 2008, the Army decided to cease procurement of a Guided Multiple Launch Rocket System (GMLRS) warhead—the Dual-Purpose Improved Conventional Munition (DPICM) warhead—because its submunitions had a dud rate up to 5%  The Air Force has also acquired cluster munitions that comply with the less than 1% failure rate—the CBU-97 Sensor Fuzed Weapon (SFW) and the CBU-105 WCMD/SFW  While DOD's new 2017 cluster munitions policy calls for DOD to continue its efforts to meet the 1% or less unexploded submunitions standard "as rapidly as industry can support," it is not yet known how this policy will affect the aforementioned programs or how it could result in the establishment of new programs  It may be argued that even with advances in "sensor-fuzed" type submunitions that seek out and destroy certain targets, cluster munitions are still essentially an indiscriminate area weapon in an era where precision weapons are increasingly becoming the military norm  In Operation Desert Storm in 1991, only about 10% of ordnance used were precision-guided, but by the time of the Iraq invasion in 2003, "the ratio of 'smart' to dumb weapons was nearly reversed " Since then, this trend toward greater precision has continued, if not accelerated with the development of precision rocket, artillery, mortar munitions, and smaller precision aerial bombs designed to reduce collateral damage  Given current and predicted future precision weaponry trends, cluster munitions might be losing their military relevance—much as chemical weapons did between World War I and World War II  According to the State Department, the U S  military suspended its use of cluster munitions in Iraq and Afghanistan in 2003  For subsequent military operations, where cluster munitions would otherwise have been the weapon of choice, Congress might review what types of weapons were substituted in place of cluster munitions and how effective they were in achieving the desired tactical results  Also worth considering are effects-based weapons systems and operations, which seek to achieve the same or similar effect against a potential target without applying a "kinetic solution" such as a cluster munition  Such insights could prove valuable in analyzing U S  policy options on the future of cluster munitions  DOD's November 2017 revised policy on cluster munitions potentially raises a number of issues for possible congressional consideration  With limits on cluster munition use after 2018 rescinded, how does this affect combatant commanders' operational plans in their respective theaters? Does this mean a lesser degree of military risk because combatant commanders can employ cluster munitions to meet warfighting demands, possibly translating into fewer forces needed to achieve the same result when the 2008 policy was in effect? Despite DOD emphasis on achieving a 1% or less unexploded submunitions standard "as rapidly as industry can support," will DOD funding restrictions slow or stall programs previously intended to replace those systems that exceeded 1% because there no longer is an urgent operational need to replace those systems? In a similar manner, will defense industry view this as a renewed opportunity to develop systems with a 1% or less unexploded submunitions standard or take a more sanguine view that since DOD is no longer time constrained to develop and field 1% or less weapons that funding these programs will be less of a priority and, therefore, an unprofitable venture? Another possible issue for consideration is how this U S  policy reversal on the military use of cluster munitions will be perceived by the international community and how this might affect future U S  and international military treaty initiatives  Consolidated Appropriations Acts The Consolidated Appropriations Act, 2010 ( P L  111-117 ), which the President signed into law December 16, 2009, prohibits the provision of military assistance for cluster munitions, the issuing of defense export licenses for cluster munitions, or the sale or transfer of cluster munitions or cluster munitions technology unless "the submunitions of the cluster munitions, after arming, do not result in more than 1 percent unexploded ordnance across the range of intended operational environments " Moreover, any agreement "applicable to the assistance, transfer, or sale of such cluster munitions or cluster munitions technology" must specify that the munitions "will only be used against clearly defined military targets and will not be used where civilians are known to be present or in areas normally inhabited by civilians " Subsequent appropriations laws have included similar provisions; the most recent is the Consolidated Appropriations Act, 2019 ( P L  116-6 ), which the President signed into law on February 15, 2019  

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: Federal and state Medicaid spending on long-term care continues to increase; for example it increased from $146 billion in 2013 to $158 billion in 2015  Individuals seeking long-term care generally need care that is, by definition, longer term in nature and more costly than other types of care  Spending on long-term care services provided in home and community settings, including assisted living facilities, exceeds the amount spent on institutional settings such as nursing homes  State Medicaid programs may cover certain medical and non-medical services that assisted living facilities provide; however, the Medicaid statute does not provide for coverage of room and board charges of an assisted living facility  In their federal-state partnership, both CMS and states play important roles in the oversight of Medicaid  CMS is responsible for oversight of state Medicaid programs  To conduct this oversight, CMS issues program requirements in the form of regulations and guidance, approves changes states make to their programs, provides technical assistance to states, collects and reviews required information and data from states and, in some cases, reviews individual state programs  States are responsible for the day-to-day administration of their Medicaid programs, including monitoring and oversight of the different HCBS programs through which they cover assisted living services, within broad federal rules and requirements  Each state is required to identify and designate a single state agency to administer or supervise the administration of its Medicaid program  The state Medicaid agency may partially or fully delegate the administration and oversight of the state’s HCBS programs to another state agency or other entity, such as a state unit on aging, a mental health department, or other state departments or agencies with jurisdiction over a specific population or service  However, the state Medicaid agency is ultimately accountable to the federal government for compliance with the HCBS requirements  Under different authorizing provisions of federal law, states have considerable flexibility to establish multiple HCBS programs including those covering assisted living services  A state Medicaid program can have multiple HCBS programs operating under different federal authorities  CMS is responsible for ensuring that states meet the requirements associated with their HCBS programs under these different authorities  Key to states’ monitoring of the health and welfare of Medicaid beneficiaries is their tracking of, and response to, incidents that may cause harm to a beneficiary’s health or welfare, such as abuse, neglect, or exploitation—commonly referred to as critical incidents  Such monitoring is required for most HCBS programs; however, we previously found that requirements for states related to oversight of the health and welfare of beneficiaries in different types of HCBS programs varied, and recommended that CMS take steps to harmonize those requirements across programs  The most common HCBS programs with the most stringent federal requirements are HCBS waiver programs  These programs serve beneficiaries who are eligible for an institutional level of care; that is, beneficiaries must have needs that rise to the level of care usually provided in a nursing facility, hospital, or other institution  CMS oversees states’ HCBS waiver programs specifically by reviewing and approving applications and reviewing HCBS program reports that states submit  HCBS waiver program applications include specific requirements implementing various statutory and regulatory provisions  (See text box below ) One requirement is that states have the necessary safeguards in place to protect the health and welfare of beneficiaries receiving services covered by HCBS waiver programs  For each of their HCBS waiver programs, states must demonstrate to CMS that they are meeting various requirements CMS has established regarding beneficiary health and welfare  The Six Requirements States Must Demonstrate for Home- and Community-Based Services Waiver Programs 1  Administrative authority: The Medicaid agency retains ultimate administrative authority and responsibility for the operation of the waiver program by exercising oversight of the performance of waiver functions by other state and local/regional non-state agencies (if appropriate) and contracted entities  2  Level of care: The state demonstrates that it implements the processes and instrument(s) specified in its approved waiver for evaluating/re-evaluating an applicant’s/waiver participant’s level of care consistent with care provided in a hospital, nursing facility, or intermediate care facility  3  Qualified providers: The state demonstrates that it has designed and implemented an adequate system for assuring that all waiver services are provided by qualified providers  4  Service plan: The state demonstrates it has designed and implemented an effective system for reviewing the adequacy of service plans for the waiver participants  5  Health and welfare: The state demonstrates it has designed and implemented an effective system for assuring waiver participant health and welfare  6  Financial accountability: The state must demonstrate that it has designed and implemented an adequate system for insuring financial accountability of the waiver program  CMS also provides ongoing oversight of state HCBS programs through annual reports that states must submit for each of their HCBS waiver programs as well as renewal reports submitted about two years before an HCBS waiver is scheduled to end  The state reports are intended to provide CMS with information on the operation of state HCBS waiver programs  In contrast to long-term care services provided in nursing facilities, less is known at the federal level about the oversight and quality of care in assisted living facilities  Generally, states establish their own licensing and oversight requirements for assisted living facilities  As a result, the requirements for assisted living facilities and the type and frequency of oversight can vary across states  In contrast, nursing homes must meet a comprehensive set of federal requirements in order to receive payment for long-term care services for Medicaid and Medicare beneficiaries in addition to state requirements  CMS contracts with state entities to regularly inspect nursing facilities and investigate complaints to assess whether nursing homes meet these federal quality requirements  Annually CMS publishes a comprehensive report on nursing homes that serve Medicaid and Medicare beneficiaries, including the extent that beneficiaries are at risk for harm, based on these investigations and inspections  In addition, CMS publicly reports a summary of each nursing home’s quality data using a five-star quality rating based on health inspection results, staffing data, and quality measure data  The goal of this rating system is to help consumers make meaningful distinctions among high- and low-performing nursing homes  This type of standardized framework for oversight, investigation and inspections, and reporting on quality of care concerns does not exist for assisted living facilities and other types of HCBS providers  Forty-eight state Medicaid agencies reported collectively spending about $10 billion in state and federal Medicaid funds for assisted living services in 2014, according to our survey  The other 3 states reported that they did not pay for assisted living services  We estimate that this spending for services provided by assisted living facilities represents 12 4 percent of the $80 6 billion Medicaid spent on HCBS in all settings that year  More than 330,000 Medicaid beneficiaries received assisted living services, based on data reported to us by the 48 states  Nationally, the average spending per beneficiary on assisted living services in the 48 states in 2014 was about $30,000; states provided these HCBS services through fee-for-service and managed care delivery models  Fee-for-service spending comprised 81 percent of total spending on assisted living services and managed care spending was about 19 percent of the total  The cost per beneficiary reported by surveyed states also varied based on payment type; average per beneficiary cost was $31,000 for fee-for-service and $27,000 for managed care  About 21 percent of Medicaid assisted living enrollment was for beneficiaries receiving these services under a managed care delivery model  (See table 1 ) Average per-beneficiary spending varied significantly across the states  For example, for the nine states with the lowest spending per beneficiary, average Medicaid spending ranged from about $1,700 to about $9,500 per beneficiary  In contrast, in the nine states with the highest per- beneficiary spending, the average spending ranged from about $43,000 to $108,000 per beneficiary  (See Figure 1 ) For more information on each state’s enrollment, total spending, and average per beneficiary spending on assisted living services, see appendix I  The 48 states that reported covering assisted living services in 2014 said they did so through 132 different programs  The majority of the states, 31 of the 48, reported administering more than one program that covered assisted living services  As illustrated in table 2 below, of the different types of HCBS programs under which states can provide coverage for assisted living services, HCBS waivers were the most common type of program they used  Specifically, 39 states and 69 percent of the programs that provided assisted living services, were operated under the HCBS waiver program  (See appendix II for additional details on each state’s number of programs by program type and total number of HCBS programs that covered assisted living facility services in 2014 ) Almost all of the 48 states that covered assisted living services did so for two groups of Medicaid beneficiaries eligible through their programs  In 45 of 48 states, aged beneficiaries received services provided by assisted living facilities  Similarly, in 43 of 48 states, physically disabled beneficiaries received services  (See Figure 2 ) In 38 or more of the 48 states that covered assisted living services, six types of services were provided  For example, 45 states covered assistance with activities of daily living, such as bathing and dressing; 44 states covered medication administration; and 41 states covered coordination of meals  (See Figure 3 ) State Medicaid agency approaches for oversight of assisted living services varied widely in terms of who provided the oversight for their largest programs, according to their responses to our survey  Thirteen of the 48 state Medicaid agencies reported delegating administrative responsibilities, including oversight of beneficiary health and welfare, to other state or local agencies  State Medicaid agencies may delegate the administration of programs to government or other agencies through a written agreement; however, state Medicaid agencies retain the ultimate oversight responsibility for those delegated functions  For example, among the 13 states that delegated HCBS program administration, the administering agencies were those that provided services to the aged, disabled, or both of these populations, such as the states’ Departments of Aging  (See text box, below, for examples of states’ delegation ) Examples of State Medicaid Agencies’ Delegation of Authority for Administration of Home- and Community-based Services’ Programs Covering Assisted Living Services Georgia’s Elderly & Disabled Waiver Program was operated in 2014 by the Georgia Department of Human Services Division of Aging Services, a separate agency of the state that was not a division/unit of the Medicaid agency  The Georgia Medicaid Agency maintained a formal interagency agreement with the Division of Aging Services which describes by function the required deliverables to support compliance and a schedule for delivery of reports  Nebraska’s Waiver for Aged and Adults and Children with Disabilities is operated by the state Medicaid agency Division of Medicaid and Long Term Care  The majority of services are provided by independent contractors in order to allow service delivery in the rural and frontier areas of the state  The state Medicaid agency contracts with the Area Agencies on Aging, Independent Living Centers, and Early Development Network agencies to perform a variety of operational and administrative functions including authorizing services and monitoring the delivery of services  States also varied in the types of information they reported reviewing as part of the oversight of assisted living services, and the extent to which state Medicaid agencies review the information when another agency is responsible for administration  For example, other entities outside the state Medicaid agency—such as the agency delegated to administer an HCBS program, or a contractor that manages provider enrollment—may check to ensure a provider is allowed to deliver services to Medicaid beneficiaries; in such cases, however, the state Medicaid agency might not be aware of the results of such checks  As illustrated in table 3, in all 48 states the types of information generally reviewed by either the state Medicaid agency, the agency delegated administrative responsibilities, or other agencies were: critical incident reports, the HHS Office of Inspector General’s list of excluded providers, patient service plans, and information on concerns about care received directly from patients, relatives, caregivers or the assisted living facility itself  In many cases, the state Medicaid agency did not review all information sources reviewed by other agencies  For example, although all critical incident reports were reviewed in the 48 states by either the state Medicaid agency, the agency delegated administrative responsibilities, or another agency; in 16 of those states, the state Medicaid agency was not involved in those reviews, according to responses to our survey  Instead, the critical incident reports were reviewed by another entity designated responsible for the HCBS program in the state or another state entity with regulatory responsibility over the assisted living facility  Such reviews, including any critical incidents found, may not have been communicated back to the state Medicaid agency, according to responses to our survey  State Medicaid agencies also varied in reporting the extent to which they were made aware or notified when enforcement actions were taken as a result of concerns with beneficiary care identified by other entities  Various oversight actions may be taken by the state Medicaid agency, the agency delegated to administer an HCBS program, or a state regulatory agency, such as a state agency responsible for licensing and inspecting various types of HCBS providers  When delegated agencies or other licensing agencies take corrective action, the state Medicaid agency may not be aware unless notified by the agencies taking that action  For example, in 23 states, the investigation of potential incidents related to beneficiary health and welfare was delegated to another agency but in only 6 of these states was the state Medicaid agency always notified of such an investigation based on our survey  (See table 4 and text box below ) Example of a Collaborative Approach to Monitoring and Ensuring Quality Care Specifically for Assisted Living Facilities In 2009, the Wisconsin Coalition for Collaborative Excellence in Assisted Living was formed to redesign the way quality is ensured and improved for individuals residing in assisted living communities  This public/private coalition utilizes a collective impact model approach that brings together the state, the industry, the consumer, and academia to identify and implement agreed upon approaches designed to improve the outcomes of individuals living in Wisconsin assisted living communities  The core of the coalition is the implementation of an association developed, department approved, comprehensive quality assurance, quality improvement program  For their largest HCBS programs that covered assisted living services, the 48 states varied in how they monitored “critical incidents” that caused actual or potential harm to Medicaid beneficiaries in assisted living facilities  Specifically, the 48 states varied in their ability to report the number of critical incidents; how they defined incidents, and the extent to which they made information on such incidents readily available to the public  These states varied in whether they could provide us the number of critical incidents involving beneficiaries for their largest programs covering assisted living services, and for those that could report, the number of incidents they reported varied widely  In 26 of the 48 states the Medicaid agencies were unable to report, for their largest program covering assisted living services, the number of critical incidents that had occurred in assisted living facilities in 2014  The remaining 22 states reported a total of 22,921 critical incidents involving Medicaid beneficiaries in their largest programs covering assisted living services  The number of critical incidents reported in these states ranged from 1 to 8,900  For six of these states the number of critical incidents reported was more than 1,000, (See text box, below, for examples of selected state processes managing critical incidents ) Selected States’ Processes for Managing Beneficiary Harm or Potential Harm in Assisted Living Facilities Georgia: According to state officials in 2014 there was no centralized or comprehensive system for capturing and tracking the data on actual and potential violations  State officials acknowledged the lack of a centralized system prevents the Division of Community Health from tracking the status of each problem  Nebraska: According to state officials, Nebraska’s Adult Protective Services operates an electronic system that coordinates across state social service programs  When Adult Protective Services initiates an investigation of reported harm to an assisted living resident, the state Medicaid agency is automatically notified  Reasons state Medicaid agencies reported for being unable to provide us with the number of critical incidents included limitations in the data or data systems for tracking them  Nine states reported an inability to track incidents by provider type, and thus distinguish critical incidents in assisted living facilities from other providers of home and community based services  States also cited lacking a system to collect critical incidents (9 states), and that the system for reporting could not identify whether a resident was a Medicaid beneficiary (5 states)


Report 2:  Even in the 32 states where the state Medicaid agencies reported reviewing information about critical incidents, 20 states were unable to provide the actual number of critical incidents that occurred in assisted living facilities  State Medicaid agencies’ definitions of critical incidents also varied  As illustrated in Figure 4, all 48 states cited physical assault, emotional abuse, and sexual assault or abuse as a critical incident in their largest programs providing assisted living services in 2014  However, for other types of incidents, several states did not identify the incident as critical, including discharge and eviction from the facility (not a critical incident in 24 states), medication errors (not a critical incident in 7 states), and unauthorized use of seclusion, (not a critical incident in 6 states)  For other serious incidents, a relatively small number of states did not identify the incident as critical, such as unexplained death (not a critical incident in 3 states) and missing beneficiaries (not a critical incident in 2 states)  See appendix IV for a full list of the beneficiary-related incidents and the number of states that identify each as critical  Although half of the 48 states that cover assisted living services did not consider discharges or evictions to be critical incidents, according to state responses to our survey, 42 states offered certain protections related to involuntary discharge of Medicaid residents who live in assisted living facilities  The majority of protections consisted of a lease agreement requirement that applied to other housing contracts in the state, such as providing residents with eviction notices  Other protections included an appeals process (10 states) and a requirement for the facility to find an alternative location for the resident (10 states)  State Medicaid agencies also varied in whether they made information on critical incidents and other key information readily available to the public  (See table 5 ) Beneficiaries seeking care in an assisted living facility may want to know the number of critical incidents related to a particular facility  Through our survey we found that states differed in the availability of information related to health and welfare that was available to the public  For example, 34 of the 48 states reported that they made critical incident information available to the public by phone, website, or in person, and the remaining 14 states did not have such information available at all  Although all 48 states had information in some form on which assisted facilities accepted Medicaid beneficiaries, 8 states could not provide this information by phone and 22 states could not provide the information in person  In recent years, CMS has taken steps to improve oversight of beneficiary health and welfare in HCBS programs by adding new HCBS waiver application requirements for state monitoring of beneficiary health and welfare  CMS requires state waiver applications to include specific requirements that implement various statutory and regulatory provisions, including a provision that states assure that they will safeguard the health and welfare of Medicaid beneficiaries  In March 2014, CMS added unexplained death to the events that states must be able to identify and address on an ongoing basis, as part of their efforts to prevent instances of abuse, neglect, and exploitation, and added four new requirements for states to protect beneficiary health and welfare  (See table 6 ) In its guidance implementing the 2014 requirements, CMS noted that state associations and state representatives’ work groups had agreed that “health and welfare is one of the most important assurances to track, and requires more extensive tracking to benefit the individuals receiving services, for instance by using data to prevent future incidents ” As a condition for approval of their HCBS waiver applications for each of the requirements, states must identify and agree with CMS on the type of information they will collect to provide as evidence that they will meet the requirements  However, according to CMS officials, each state Medicaid agency has wide discretion over the information it will collect and report to demonstrate that it is meeting the health and welfare requirements and protecting beneficiaries  Although CMS added the additional requirements in 2014 for safeguarding beneficiary health and welfare, the agency generally did not change requirements for how it oversees state monitoring efforts once HCBS waivers are approved  We found a number of limitations in CMS’s oversight of approved HCBS waivers that undermine the agency’s ability to effectively monitor state oversight of HCBS waivers  These limitations include: unclear guidance on what states should identify and report annually related to any identified program deficiencies; lack of requirements on states to regularly provide CMS information on critical incidents; and CMS’s inconsistent enforcement of the requirement that states submit annual reports  Unclear guidance on what states should identify and report annually related to any identified program deficiencies  Federal law requires states to provide CMS with information annually on an HCBS waiver’s impact on (1) the type and amount, and cost of services provided and (2) the health and welfare of Medicaid beneficiaries receiving waiver services  CMS reporting requirements give states latitude to determine what to report as health and welfare deficiencies found through state monitoring of their HCBS programs  With respect to health and welfare, CMS’s State Medicaid Manual directs states when preparing their annual reports to “check the appropriate boxes regarding the impact of the waiver on the health and welfare” of beneficiaries and to describe relevant information  States are required to provide a brief description of the state process for monitoring beneficiary safeguards, use check boxes to indicate that beneficiary health and welfare safeguards have been met, and identify whether deficiencies were detected during the monitoring process  If states determine that deficiencies were identified through monitoring, states are required to “provide a summary of the significant areas where deficiencies were detected” and an explanation of the actions taken to address deficiencies and ensure the deficiencies do not recur  CMS’s written instructions for completing the HCBS annual report do not provide further guidance regarding reporting of deficiencies  For example, the reporting instructions do not describe or identify 1) what states are supposed to report as deficiencies, 2) how they are to identify which deficiencies are most significant, and 3) the extent to which states need to explain the steps taken to ensure that deficiencies do not recur  The lack of clarity is inconsistent with federal internal control standards, in particular, the need for federal agencies to have processes that identify information needed to achieve objectives and address risk  Without clear instructions as to what states must report, states’ annual reports may not identify deficiencies with states’ HCBS waiver programs that may affect the health and welfare of beneficiaries  States may determine that issues or problems they identified through monitoring do not represent reportable deficiencies and therefore may not report those deficiencies to CMS, increasing the risk that problems are not elevated to CMS’s attention  In the case of one of the selected states we reviewed, no problems were included on the annual reports submitted to CMS between 2011 and 2015  However, when CMS completed its review in the fourth year of the state’s waiver— for purpose of renewing the waiver—it determined the state was not assuring beneficiary health and welfare  CMS found that the information the state submitted for purpose of renewal suggested a “pervasive failure” by the state to assure the health and welfare of beneficiaries receiving services, including assisted living services  In particular, CMS noted the state provided insufficient information regarding the number of unexpected or suspicious beneficiary deaths  CMS concluded that the state failed to demonstrate that it has effective systems and processes for ensuring the health and welfare of beneficiaries  Lack of requirements on states to annually provide CMS information on critical incidents  Despite the importance of state critical incident management and reporting systems to protecting the health and welfare of beneficiaries, CMS lacks written requirements that states provide information needed for the agency oversight of state monitoring of critical incidents  According to CMS, a critical element of effective state oversight is the operation of data systems that support the identification of trends and patterns in the occurrence of critical incidents to identify needed improvements  Such a system is also consistent with federal internal controls standards which specify, in particular, the need for federal agencies to have processes that identify information needed to achieve objectives and address risk  CMS requires states to operate a critical incident reporting system  On their waiver applications states must check a box indicating they operate a system and also describe their system—including who must report and when, and what must be reported  Despite this requirement for states to have critical incident reporting systems, CMS does not require states to report to CMS any data from these systems on critical incidents as part of their required annual reports  Specifically, states are not required to include, in their annual reports, the number of critical incidents reported or substantiated that involve Medicaid beneficiaries  As a result, CMS does not have a method to confirm what states describe about critical incident management systems, which is a required component of states’ waiver applications or to assess the capabilities of states’ systems  For example, CMS cannot confirm whether the state systems can report incidents by location or type of residential provider, such as assisted living facilities; the type and severity of critical incidents that occurred; and the number of incidents that involved Medicaid beneficiaries  Without annual critical incident reporting, CMS may be at risk of (1) not having adequate evidence that states are meeting CMS requirements to have an effective critical incident management and reporting system and of (2) being unaware of problems with states’ abilities to identify, track, and address critical incidents involving Medicaid beneficiaries  Our prior work has shown that the lack of explicit reporting requirements on critical incidents not only impacts HCBS waiver programs but also impacts other types of Medicaid long-term services programs as well  Specifically, In a November 2016 report, we found that CMS requirements for states to report on their critical incident monitoring systems for the HCBS waiver program were more stringent than those for other types of HCBS programs, potentially leaving those other programs at even greater risk  We recommended that CMS take steps to harmonize requirements across different types of HCBS programs  HHS concurred with the recommendation stating it would seek input from states, stakeholders, and the public regarding harmonizing requirements across programs  In an August 2017 report we found similar issues in critical incident reporting requirements for other types of long term services programs, particularly those used to provide HCBS and other long term services under managed care  We found that CMS was not always requiring states that contracted with managed care organizations to provide long term services and supports to report to CMS sufficient information on critical incidents and other key areas needed to monitor beneficiary access and quality  We recommended that CMS take steps to identify and obtain key information needed to better oversee states’ efforts to monitor beneficiary access to quality services in their managed long-term services and supports programs  HHS concurred with this recommendation and stated that the agency would take this recommendation into account as part of an ongoing review of its 2016 Medicaid managed care rule  We continue to believe that the implementation of our prior recommendations is needed to help improve CMS oversight of states monitoring of beneficiary safety  CMS’s inconsistent enforcement of the requirement that states submit annual reports  States must prepare and submit an annual report for each HCBS waiver as a condition of waiver approval  According to CMS guidance, the agency’s review of the annual report is part of the ongoing oversight of HCBS waiver programs and not submitting an annual report jeopardizes the states renewal of HCBS waiver programs  However, some states have not been timely in submitting the required annual reports for their HCBS waivers  A review of 2013 HCBS annual reports by a CMS contractor, published in 2016, found that annual reports were missing for 29 HCBS waivers and multiple years’ of annual reports were missing for 8 waivers  In 2014, CMS adopted new strategies to ensure compliance with HCBS waiver requirements, including the requirement that states submit annual reports on a timely basis  These strategies include withholding federal funding, placing a moratorium on enrollment in the waiver, or other actions the agency determines necessary  CMS officials reported that the agency had not used these new strategies with states that were delinquent in submitting their annual reports  Officials said they were in the process of reviewing how to implement these new strategies in the case of one state; however, as of August 2017 officials had not finalized a decision  CMS’s ability to provide effective oversight of state programs and protect beneficiary health and welfare is undermined by the lack of enforcement and receipt of required annual waiver reports  Effective state and federal oversight is necessary to ensure that the health and welfare of Medicaid beneficiaries receiving assisted living services are protected, especially given the particular vulnerability of many of these beneficiaries to abuse, neglect, or exploitation  CMS has taken steps to strengthen beneficiary health and welfare protections in states’ HCBS waiver programs, the most common type of program that covers assisted living services and one that serves the most vulnerable beneficiaries  In particular, CMS now has multiple requirements for states to safeguard beneficiaries’ health and welfare, including requirements to operate an effective critical incident management and reporting system to identify, investigate, and address incidents of beneficiary abuse, neglect, exploitation, and unexplained death  However, CMS’s ability to effectively monitor how well states are assuring beneficiary health and welfare is limited by gaps in state reporting to CMS  CMS has not provided clear guidance to states on what information to include in annual reports on deficiencies they identify  As a result, CMS lacks assurance that it is receiving consistent, complete, and relevant information on deficiencies that is needed to oversee beneficiary health and welfare  Lacking clear guidance on the reporting of deficiencies may result in a delayed recognition of problems that may affect beneficiary health and welfare  Further, for years, states have been required to check a box attesting that they operate a critical incident management system, but have not always been required to report information on incidents of potential or actual harm to beneficiaries  Given the increasing prevalence of assisted living facilities as a provider of services to Medicaid beneficiaries, it is unclear why more than half of states responding to our survey could not provide us information on the number of critical incidents that occurred in these facilities in their states  Reporting data from their critical incident systems, such as the number of incidents, the type and severity of the incidents, or the location or type of facility in which the incident occurred would provide evidence that an effective system is in place, provide information on the extent beneficiaries are subject to actual or potential harm, and allow for tracking trends over time  Finally, CMS has not ensured that all states submit annual reports on their HCBS waiver programs as required  Without improvements to state reporting, CMS cannot ensure states are meeting their commitments to protect the health and welfare of Medicaid beneficiaries receiving assisted living services, potentially jeopardizing their care  We are making the following three recommendations to CMS: The Administrator of CMS should provide guidance and clarify requirements regarding the monitoring and reporting of deficiencies that states using HCBS waivers are required to report on their annual reports  (Recommendation 1) The Administrator of CMS should establish standard Medicaid reporting requirements for all states to annually report key information on critical incidents, considering, at a minimum, the type of critical incidents involving Medicaid beneficiaries, and the type of residential facilities, including assisted living facilities, where critical incidents occurred  (Recommendation 2) The Administrator of CMS should ensure that all states submit annual reports for HCBS waivers on time as required  (Recommendation 3) We provided a draft of this report to HHS for review and comment  HHS provided written comments, which are reproduced in Appendix V  The department also provided technical comments, which we incorporated as appropriate  In its written comments, the department concurred with two of our three recommendations, specifically, that CMS will clarify requirements for state reporting of program deficiencies and ensure that all states submit required annual reports on time  HHS did not explicitly agree or disagree with our third recommendation to require all states to report information on critical incidents to CMS annually  The department noted it has established a workgroup to learn more about states’ health and welfare systems and that it will use the results of this workgroup to determine which additional reporting requirements would be beneficial  The workgroup’s review will continue through calendar year 2018  In technical comments, HHS indicated that after the workgroup’s review is complete it will consider annual reporting of critical incidents  We believe establishing the workgroup is a positive first step towards improving oversight and state reporting and encourage HHS to require annual reporting on critical incidents when developing additional reporting requirements  As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of CMS, the Administrator of the Administration for Community Living, appropriate congressional committees, and other interested parties  In addition, the report will be available at no charge on the GAO website at http://www gao gov  If you or your staff members have any questions about this report, please contact me at (202) 512-7114 or at iritanik@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 that made key contributions to this report are listed in appendix VI  Our survey of state Medicaid agencies regarding coverage, spending, enrollment, and oversight of assisted living services in 2014, obtained information on challenges for Medicaid beneficiaries to access assisted living services in their states  States provided information related to factors that create challenges for Medicaid beneficiaries’ ability to access and receive assisted living services and the extent states had policies to help beneficiaries with the cost of room and board  A number of states in our survey cited common factors as creating the greatest challenges to a beneficiary’s ability to access assisted living services, including the number of assisted living facilities willing to accept Medicaid beneficiaries (13 states or 27 percent of the 48 states) program enrollment caps (9 states or 19 percent of the 48 states) beneficiaries’ inability to pay for assisted living facility room and board (9 states or 19 percent of the 48 states), which Medicaid typically does not cover low rates the state Medicaid program paid assisted living facilities (8 states or 17 percent of the 48 states)  A number of states reported that they had policies to assist Medicaid beneficiaries with the costs of room and board charged by assisted living facilities, which Medicaid does not typically cover  Two common policies, cited by at least half of the states, were aimed at limiting how much assisted living facilities could charge Medicaid beneficiaries for room and board  For example, 30 of 48 states, limited the amount facilities could charge for room and board to the amount of income certain beneficiaries receive as Supplemental Security Income  The other commonly cited policies focused on providing financial assistance to the beneficiaries to defray the room and board costs  (See table 9 ) In addition to the contact named above, Tim Bushfield and Christine Brudevold (Assistant Directors), Jennie Apter, Shirin Hormozi, Anne Hopewell, Kelsey Kreider, Perry Parsons, Vikki Porter, and Jennifer Whitworth made key contributions to this report 

ground_truth: Cluster munitions are air-dropped or ground-launched weapons that release a number of smaller submunitions intended to kill enemy personnel or destroy vehicles. Cluster munitions were developed in World War II and are part of many nations' weapons stockpiles. Cluster munitions have been used frequently in combat, including the early phases of the current conflicts in Iraq and Afghanistan. Cluster munitions have been highly criticized internationally for causing a significant number of civilian deaths, and efforts have been undertaken to ban and regulate their use. The Department of Defense (DOD) continues to view cluster munitions as a military necessity but in 2008 instituted a policy to reduce the failure rate of cluster munitions to 1% or less after 2018. In November 2017, a new DOD policy was issued that essentially reversed the 2008 policy. Under the new policy, combatant commanders can use cluster munitions that do not meet the 1% or less unexploded submunitions standard in extreme situations to meet immediate warfighting demands. In addition, the new policy does not establish a deadline to replace cluster munitions exceeding the 1% rate and states that DOD "will retain cluster munitions currently in active inventories until the capabilities they provide are replaced with enhanced and more reliable munitions." Potential issues for Congress include cluster munitions in an era of precision weapons, other weapons in lieu of cluster munitions, and the potential impact of DOD's 2017 revised cluster munitions policy.