You are given two reports by the government agency.  

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:
The EFMP provides support to families with special needs at their current and proposed locations. Servicemembers relocate frequently, generally moving every 3 years if in the Army, Marine Corps, and Navy, and every 4 years if in the Air Force. In fiscal year 2016, the Military Services relocated approximately 39,000 servicemembers enrolled in the EFMP to CONUS installations. To implement DOD’s policy on support for families with special needs, DOD requires each Service to establish its own EFMP for active duty servicemembers. EFMPs are to have three components—identification and enrollment, assignment coordination, and family support. Identification and enrollment: Medical and educational personnel at each installation are responsible for identifying eligible family members with special medical or educational needs to enroll in the EFMP. Once identified by a qualified medical provider, active duty servicemembers are required to enroll in their service’s EFMP. Servicemembers are also required to self-identify when they learn a family member has a qualifying condition. Assignment coordination: Before finalizing a servicemember’s assignment to a new location, DOD requires each Military Service to consider any family member’s special needs during this process, including the availability of required medical and special educational services at a new location. Family support: DOD requires each Military Service’s EFMP to include a family support component through which it helps families with special needs identify and gain access to programs and services at their current, as well as proposed, locations. Servicemembers assigned to a joint base would receive family support from the Service that is responsible for leading that installation. For example, an Airman assigned to a joint base where the Army is the lead would receive family support from the Army installation’s EFMP. As required by the NDAA for Fiscal Year 2010, DOD established the Office of Community Support for Military Families with Special Needs (Office of Special Needs or OSN) to develop, implement, and oversee a policy to support these families. Among other things, this policy must (1) address assignment coordination and family support services for families with special needs; (2) incorporate requirements for resources and staffing to ensure appropriate numbers of case managers are available to develop and maintain services plans that support these families; and (3) include requirements regarding the development and continuous updating of a services plan for each military family with special needs. OSN is also responsible for collaborating with the Services to standardize EFMP components as appropriate and for monitoring the Services’ EFMPs. OSN has been delegated the responsibility of implementing DOD’s policy for families with special needs by the Undersecretary of Defense for Personnel and Readiness through the Assistant Secretary for Manpower and Reserve Affairs according to DOD officials. Currently, OSN is administered under the direction of the Deputy Assistant Secretary of Defense for Military Community and Family Policy through the Office of Military Family Readiness Policy. In addition, each Military Service has designated a program manager for its EFMP who is also responsible for working with OSN to implement its EFMP (see fig. 1). DOD’s guidance for the EFMP (1) identifies procedures for assignment coordination and family support services; (2) designates the Assistant Secretary of Defense for Manpower and Reserve Affairs as being responsible for monitoring overall EFMP effectiveness; (3) assigns the OSN oversight responsibility for the EFMP, including data review and monitoring; and (4) directs each Service to develop guidance for overseeing compliance with DOD requirements for their EFMP. Table 1 provides an overview of the procedures each Service must establish for the assignment coordination and family support components of the EFMP. As a part of its guidance for monitoring military family readiness programs, DOD also requires each Military Service to certify or accredit its family readiness services, including family support services provided through the EFMP. In addition, DOD states that each Service must balance the need for overarching consistency across EFMPs with the need for each Service to provide family support that is consistent with their specific mission. To accomplish this, each Service is required to jointly work with DOD to develop a performance strategy, which is a plan that assesses the elements of cost, quality, effectiveness, utilization, accessibility, and customer satisfaction for family readiness services. In addition, each Military Service is required to evaluate their family readiness services using performance goals that are linked to valid and reliable measures such as customer satisfaction and cost. DOD also requires each Service to use the results of these evaluations to inform their assessments of the effectiveness of their family readiness services for families with special needs. According to DOD officials, each Military Service provides family support services in accordance with DOD guidance as well as Service-specific guidance. However, we found wide variation in each Service’s requirements for family support personnel as well as the practices and expectations of EFMP staff. As a result the type, amount, and frequency of assistance enrolled families receive varies from Service to Service and when a servicemember from one Service is assigned to a joint base led by another Service (see table 2). For example, in terms of a minimum level of contact for families with special needs enrolled in the EFMP, the Services vary in the frequency with which they require family support providers to contact families with special needs: The Marine Corps specifies a frequency (quarterly) with which families with special needs should be contacted by their family support providers. The Air Force has each installation obtain a roster of families with special needs enrolled in the EFMP on a monthly basis, but it does not require family support providers to, for example, use this information to regularly contact these families. The Navy assigns one of three service levels to each family member enrolled in the EFMP. These service levels are based on the needs of each family with special needs; family support providers are responsible for assigning a “service level” that directs the frequency with which the family must be contacted. The Army has no requirements for how often families with special needs should be contacted. The Services also vary as to whether they offer legal assistance to families with special needs as follows: The Marine Corps employs two attorneys who can represent families with special needs who fail to receive special education services from local school districts, as specified in their children’s individualized education programs (IEP). They can also advise EFMP-enrolled families on their rights and options if a family believes their child needs special education services from a local school district (e.g., an IEP). The Air Force, Army, and Navy choose not to employ special education attorneys. Officials with whom we spoke said families with special needs in these Services can receive other types of assistance that may help them resolve special education legal issues. For example, Air Force officials said servicemembers and their families can receive support from attorneys that provide general legal assistance on an installation, Army officials said installation EFMP managers can refer families with special needs to other organizations that provide legal support, and Navy officials said families can find support through working with their installation’s School Liaison Officers. The NDAA for Fiscal Year 2010 requires DOD’s policy to include requirements regarding the development and continuous updating of a services plan (SP) for each family with special needs, and DOD has specifically required these plans as part of the provision of family support services. These plans describe the necessary services and support for a family with special needs and document and track progress toward meeting related goals. According to DOD guidance, these plans should also document the support provided to the family, including case notes. In addition, the DOD reference guide for family support providers emphasizes that timely, up-to-date documentation is especially important each time a family relocates, as military families regularly do. Therefore, SPs are an important part of providing family support during the relocation process, and provide a record for the gaining installation. Requiring timely and up-to-date documentation is consistent with federal internal control standards, which state that agencies should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving their objectives. SPs follow families with special needs each time they relocate and without timely and up-to-date documentation, DOD cannot ensure that all families continue to receive required medical and/or special educational services once they relocate to another installation. For every Service the number of SPs was relatively few when compared to the number of servicemembers (known as sponsors) or the number of family members enrolled in the EFMP (see table 3). The Services and OSN provided a range of reasons as to why the Services do not develop and maintain a SP for each family with special needs. For example, Air Force officials said their family support providers consider the needs of each family with special needs before determining whether a SP will help them receive the required services. In addition, Army and Marine Corps officials said they may not develop these plans if families do not request them. Further, according to a Navy official, some families lack the required SPs because installations may not have the staff needed to develop them—even though DOD requires the Services to maintain sufficient staff and certify their EFMPs. OSN officials with whom we spoke also said that the Services may not have developed many SPs during fiscal year 2016 because DOD had not yet approved a standardized form that could be used to meet this requirement. Finally, OSN officials also said that each family with special needs enrolled in the EFMP may not need a SP because their condition does not require this type of family support. To meet requirements of the NDAA for Fiscal Year 2010, in April 2017, DOD issued to the Services guidance that directed them to “rogram, budget, and allocate sufficient funds and other resources, including staffing,” to meet DOD’s policy objectives for the EFMP. According to OSN officials, DOD relies on each Service to determine what level of funds and resources is sufficient and what constitutes an appropriate number of family support personnel. To determine family support providers and related personnel staffing levels, the Service officials with whom we spoke said they consider a number of factors, including the number of families with special needs enrolled in the EFMP at any given installation (see app. II for more information about the EFMP data by installation). See Table 4 for a summary of EFMP family support providers and other key personnel at CONUS installations. As required by DOD, all of the Services employ family support providers to assist families with special needs. In addition, some Services employ additional personnel to support implementation of the EFMP (see sidebar). For example, the Air Force employs family support coordinators to administer its EFMP and no other personnel are dedicated to assisting these coordinators or enrolled families. The Army employs “system navigators” who provide individualized support to families with special needs at selected installations through its EFMP, as well as other personnel to administer the EFMP. workers at most of its CONUS installations to administer individualized support to families with special needs. In addition, the Marine Corps employs program managers, administrative assistants, as well as training and education outreach specialists. The Navy contracts regional case liaisons and case liaisons at selected CONUS installations to administer individualized support to families with special needs. In addition, the Navy employs collateral duty case liaisons who assist with the delivery of family support services at all other CONUS installations. Senior OSN officials said they rely on each Service to determine the extent to which its EFMP complies with DOD’s policy for families with special needs because they consider OSN to be a policy-making organization that is not primarily responsible for assessing compliance. In addition, these officials said the Services need flexibility to implement DOD’s policy for families with special needs because they each have unique needs and the number of enrolled families in the EFMP is constantly changing. However, DOD has not developed a standard for determining the sufficiency of funding and resources each Service allocates for family support. Air Force officials at one of the installations we visited said the Air Force identified the lack of staff and funding to provide individualized support to most families with special needs as an issue. In addition, officials from the Army and Navy said they have not received any guidance from OSN officials about their Service-specific guidance, including requirements for resources and services plans. Further, the Services may not know the extent to which their Service- specific guidance complies with DOD’s policy for families with special needs. The NDAA for Fiscal Year 2010 requires DOD to identify and report annually to the congressional defense committees on gaps in services for military families with special needs and to develop plans to address these gaps. However, DOD’s most recent reports to the congressional defense committees did not address the relatively few SPs being created for families with special needs, or whether the Services are providing sufficient resources to ensure an appropriate number of family support providers. Federal internal control standards require that agencies establish control activities, such as developing clear policies, in order to accomplish agency objectives such as those of the Services’ EFMPs. Without fully identifying and addressing potential gaps in family support across these programs, some families with special needs may not get the assistance they require, particularly when they relocate. Each Service monitors EFMP assignment coordination and family support using a variety of mechanisms, such as regularly produced internal data reports. However, DOD has not yet established common performance measures to track the Services’ progress in implementing its standard procedures over time or developed a process to evaluate the overall effectiveness of each Service’s assignment coordination and family support procedures. DOD requires each Service to monitor implementation of their EFMP, including their procedures for assignment coordination and family support. To comply with this requirement, each Service has developed guidance that establishes monitoring protocols and assigns oversight responsibilities. Officials from each Service told us they use internal data reports from each installation to monitor assignment coordination and family support. To monitor assignment coordination, officials from each Service told us their headquarters reviews proposed assignment locations for families with special needs enrolled in the EFMP. These officials said monitoring proposed assignment locations helps ensure that enrolled families will be able to access required services at their new installations. In addition, Army officials said each Army unit commander is responsible for tracking the number of families with special needs that have expired enrollment paperwork because it affects assignment coordination worldwide. Several years ago, the Army determined that 25 percent of soldiers (over 13,000) enrolled in the EFMP had expired enrollment paperwork, complicating the task of considering each enrolled family’s special medical or educational needs as part of proposed relocations. In response, in August 2011, the Army revised its policies and procedures for updating enrollment paperwork which would help ensure a family member’s special needs are considered during the assignment coordination process. To monitor family support provided by installations worldwide, each Military Service told us they use a variety of mechanisms (see table 5). The Marine Corps pays particular attention to customer satisfaction. Marine Corps officials told us that every three years Marine Corps headquarters administers a survey of family members enrolled in the EFMP. We previously reported that organizations may be able to increase customer satisfaction by better understanding customer needs and organizing services around those needs. This survey is one of the primary ways Marine Corps headquarters measures customer satisfaction with family support services at installations worldwide. Marine Corps officials also said this survey helps ensure its EFMP is based on the current needs of families with special needs. To improve its oversight of the EFMP and implement its policy for families with special needs, DOD, through OSN, has several efforts under way to standardize the Services’ procedures for assignment coordination and family support. However, DOD has not developed common performance measures to monitor its progress toward these efforts and has not developed a process for assessing the Services’ related monitoring activities. Federal internal control standards emphasize the importance of assessing performance over time and evaluating the results of monitoring activities. To help improve family member satisfaction by addressing gaps in support that may exist between Services, OSN has begun to standardize procedures for assignment coordination and family support. To date, OSN’s efforts have focused on ensuring each Service’s EFMP considers the needs of family members during the assignment process and helps family members identify and gain access to community resources. According to OSN’s April 2017 Report to Congress, the long-term goal of these efforts is to help ensure that all families with special needs enrolled in the EFMP receive the same level of service regardless of their Military Service affiliation or geographic location. In addition, OSN officials told us its standardized procedures will also help DOD perform required oversight by improving its access to Service-level data and its ability to validate each Service’s monitoring activities. To date, efforts to standardize assignment coordination and family support have included efforts such as developing new family member travel screening forms which will be the official documents used during the assignment coordination process and completing a DOD-wide customer service satisfaction survey on EFMP family support (see table 6). Despite its efforts to begin standardizing assignment coordination and family support services, DOD is unable to measure its progress in standardizing assignment coordination and family support procedures for families with special needs and assessing the Services’ performance of these processes because it has not yet developed common metrics for doing so. Federal internal control standards emphasize the importance of agencies assessing performance over time. We have also reported on the importance of federal agencies engaging in large projects using performance metrics to determine how well they are achieving their goals and to identify any areas for improvement. By using performance metrics, decision makers can obtain feedback for improving both policy and operational effectiveness. Additionally, by tracking and developing a baseline for all measures, agencies can better evaluate progress made and whether or not goals are being achieved—thus providing valuable information for oversight by identifying areas of program risk and causes of risks or deficiencies to decision makers. Through our body of work on leading performance management practices, we have identified several attributes of effective performance metrics relevant to OSN’s work (see table 7). OSN officials said each Service is currently responsible for assessing the performance of its own EFMP, including the development of Service- specific goals and performance measures. OSN officials said that they recognize the need to continually measure the department’s progress overall in implementing its policy for families with special needs, and are considering ways to do so. They also said they have encountered challenges to developing common performance measures. In addition, OSN officials said its efforts to reach consensus among the Services about performance measures for the overall EFMP are still ongoing because each Service wants to maintain its own measures, and DOD has not required them to reach a consensus. Absent common performance measures, DOD is unlikely to fully determine whether its long-standing efforts to improve support for families with special needs are being implemented as intended. DOD requires each Service to monitor its own family readiness programs, including procedures for assignment coordination and family support through the EFMP, but lacks a systematic process to evaluate the results of these monitoring activities. To monitor family readiness services, as required by DOD, each Service must accredit or certify its family support services, including the EFMP, using standards developed by a national accrediting body not less than once every 4 years. In addition, personnel from each Service’s headquarters are required to periodically visit installations as a part of their monitoring activities for assignment coordination, among other things. The Services initially had the Council on Accreditation accredit family support services provided through their installations’ EFMPs using national standards developed for military and family readiness programs, according to the officials with whom we spoke. However, by 2016, each Service was certifying installations’ family support services using standards that meet those of a national accrediting body, Service-specific standards, and best practices. According to officials from each Service with whom we spoke, this occurred due to changes in the funding levels allocated to this activity. Table 8 provides an overview of the certification process currently being used by each Service. OSN officials said they do not have an ongoing process to systematically review the results of the Services’ activities, including the certification of EFMPs because they choose to rely on the Services to develop their own monitoring activities and ensure they provide the desired outcomes. In doing so, DOD allows each Service to develop its own processes for certifying installations’ family support services, including the selection of standards. In addition, OSN officials told us that efforts to standardize certification of EFMPs are ongoing because the Military Services have not been able to reach consensus on a set of standards that can be used across DOD for installations’ family support services. Further, OSN has not established a process to assess the results of the Services’ processes for certifying installations’ family support services. Federal standards for internal control state that management should evaluate the results of monitoring efforts—such as those the Services are conducting on their own—to help ensure they meet their strategic goals. The lack of such a process hampers OSN’s ability to monitor the Services’ EFMPs and determine the adequacy of such programs as required by the NDAA for Fiscal Year 2010. OSN’s job of developing a policy for families with special needs that will work across DOD’s four Services is challenging given the size, complexity, and mission of the U.S. military. It has had to consider, among other things, the Services’ mission requirements, resource constraints, and the myriad demands on servicemembers and their families during their frequent relocations. Anything that further complicates a relocation—such as not receiving the required family support services for family members with special needs—potentially affects readiness or, at a minimum, makes an already stressful situation worse. By providing little direction on how the Services should provide family support or what the scope of family support services should be, some servicemembers get more—or less—from the EFMP each time they relocate, including when a servicemember from one Service is assigned to a joint base led by another Service. By largely deferring to the Services to design, implement, and monitor their EFMPs’ performance, DOD cannot, as required by the NDAA for Fiscal Year 2010, fully determine the adequacy of the Services’ EFMPs in serving families with special needs, including any gaps in services these families receive, because it has not built a systematic process to do so. Instead, it relies on the Services to self-monitor and address, within each Service, the results of monitoring activities. However, because servicemembers relocate frequently and often depend on the EFMP of a Service other than their own, a view of EFMP performance across all of the Services is essential to ensuring, for example, that relocating servicemembers get consistent EFMP service delivery no matter where they are stationed. Evaluating and developing program improvements based on the results of the Services’ monitoring would help DOD ensure the Services’ EFMPs achieve the desired outcomes and improve its ability to assess the overall effectiveness of the program. We are making the following three recommendations to DOD: We recommend the Secretary of Defense direct the Office of Special Needs (OSN) to assess the extent to which each Service is (1) providing sufficient resources for an appropriate number of family support providers, and (2) developing services plans for each family with special needs, and to include these results as part of OSN’s analysis of any gaps in services for military families with special needs in each annual report issued by the Department to the congressional defense committees. (Recommendation 1) We recommend that the Secretary of Defense direct the Office of Special Needs (OSN) to develop common performance metrics for assignment coordination and family support, in accordance with leading practices for performance measurement. (Recommendation 2) We recommend that the Secretary of Defense implement a systematic process for evaluating the results of monitoring activities conducted by each Service’s EFMP. (Recommendation 3) We provided a draft of this report to the Department of Defense (DOD) for comment. DOD provided written comments, which are reproduced in appendix IV. DOD also provided technical comments, which we incorporated as appropriate. DOD agreed with all three of our recommendations. In its written comments, DOD stated that additional performance metrics need to be developed for assignment coordination and that it is in the process of measuring families’ satisfaction with family support provided through the EFMP. DOD also stated that it is developing plans for evaluating the results of each Service’s monitoring activities for the EFMP. We are sending copies of this report to the appropriate congressional committees, the Secretaries of Defense and Education, and other interested parties. The report also 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 (617) 788-0580 or nowickij@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 V. The National Defense Authorization Act (NDAA) for Fiscal Year 2017 includes a provision for GAO to assess the effectiveness of the Department of Defense’s (DOD) Exceptional Family Member Programs (EFMP). This report focuses on the assignment coordination and family support components of the EFMP for dependents with special needs and examines: (1) the extent to which each Service has provided family support as required by DOD, and (2) the extent to which the Services monitor and DOD evaluates assignment coordination and family support. To address these objectives, we used a variety of data collection methods. Key methods are described in greater detail below. For both objectives, we reviewed relevant federal laws, regulations, and DOD guidance and documentation that pertain to the EFMP, including the following: The NDAA for Fiscal Year 2010, which established the Office of Special Needs and defined program requirements for assisting families with special needs, including assignment coordination and family support. DOD’s guidance for administering the EFMP. We assessed how DOD implements the requirements in the NDAA for Fiscal Year 2010; how each Service implements assignment coordination and family support; and how the Services and DOD monitor assignment coordination and family support using performance measures. Specially, we reviewed DOD Instruction 1315.19 - Exceptional Family Member Program; Service-specific guidance and related documents from the Air Force, Army, Marine Corps, and Navy; and DOD Instruction 1342.22 - Military Family Readiness. Standards for internal control in the federal government related to the documentation of responsibilities through policies, performance measures, and evaluating the results of monitoring activities. We compared each Service’s procedures for monitoring assignment coordination and family support to these standards. To determine the extent of the Services’ EFMP family support, we obtained and analyzed fiscal year 2016 EFMP data (the most recent available) for each Service. We reviewed DOD policy to identify data variables that each Service maintains related to its EFMP. We used these data to summarize key characteristics of each Service’s EFMP. The selected variables provided Service-wide and installation-specific EFMP information on, the number of continental United States (CONUS) and outside the continental United States (OCONUS) installations; the number of servicemembers (sponsors) enrolled in the EFMP; the number of family members with special needs enrolled in the EFMP; the number of EFMP family support personnel; and the number of services plans created for families with special needs enrolled in the EFMP. We determined that the selected data variables from each Service are sufficiently reliable for the purposes of providing summary results about family support for fiscal year 2016. To learn more about how the Services implement their EFMPs, we visited seven installations in five states. We selected the seven installations based on their location in states with the largest number of military- connected students in school year 2012-2013 (the most recent available and reliable data) or in states with the largest percentage of students enrolled in U.S. DOD schools as of May 2017, as well as their status as a joint base. At each installation, we interviewed installation officials, EFMP managers, selected family support personnel, and family members and caregivers enrolled in the program. In states we visited that had the largest number of military-connected students, the EFMP personnel we interviewed collectively served 66 percent of students who attend local public schools and 42 percent of the students attending U.S. DOD schools. To obtain illustrative examples about how the EFMP serves families with special needs, we conducted seven group interviews with EFMP-enrolled family members and caregivers (one at each of the seven installations we visited). Using a prepared script, we asked participants to describe how they were identified and enrolled in the EFMP, how they were assigned to new installations, and the types of family support services they received. We also asked about how these services aligned with their family member’s EFMP-eligible condition, the benefits and challenges they experienced, as well as their overall satisfaction. A total of 38 self- selected volunteers participated in the seven group discussions. While the participants in these groups included a variety of family members and caregivers, the number of participants and groups were very small relative to the total number of family members enrolled in the EFMP. Their comments are not intended to represent all EFMP-enrolled family members or caregivers. Other EFMP-enrolled family members and caregivers may have had other experiences with the program during the same period. Finally, for both objectives, we conducted interviews with a variety of DOD, Service-level, and nonfederal officials. We spoke with DOD officials from the Office of the Assistant Secretary of Defense–Offices of Manpower and Reserve Affairs, Military Community and Family Policy, Military Family Readiness Policy, and Special Needs. We also spoke with EFMP Managers from Air Force, Army, Marine Corps, and Navy headquarters. We also met with officials from selected national military family advocacy organizations including the National Military Family Association; the Military Family Advisory Network; and the Military Officers Association of America to discuss the EFMP. We conducted this performance audit from February 2017 to May 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. Each Service has an Exceptional Family Member Program (EFMP) that provides support to military families with special needs. The tables below present the following information on selected EFMP and family support categories for each Service’s program at continental United States (CONUS) and outside the continental United States (OCONUS) installations in fiscal year 2016: City, state or country; Number of exceptional family members; Number of family support providers (by Full-Time Equivalent); Number of family support provider vacancies; Number of services plans; Number of indirect contacts; and Number of direct contacts. The information below is listed sequentially in alphabetical order by Service. We held small group discussions with Exceptional Family Member Program (EFMP) participants at the seven military installations we visited. Family members and caregivers who attended each session reported they had children or spouses with EFMP-eligible conditions. The discussion group participants were self-selected; and their comments are not intended to represent all EFMP -enrolled family members or caregivers in fiscal year 2016. In addition, other EFMP -enrolled family members and caregivers may have had different experiences with the program during the same period. There were a total of 38 participants representing all the Services. The following issues were discussed by one or more participants during the small group discussions at the installations we visited. The issues that emerged relate to the current and future overall effectiveness of the EFMP. Overall Satisfaction with EFMP (Discussed by 30 of 38 participants): Measure of participants’ approval of the family support services offered and experience with the EFMP. Many participants expressed overall satisfaction with the EFMP. Several participants expressed dissatisfaction with the EFMP. A participant expressed dissatisfaction with the lack of consistency in the provision of family support services (i.e., special education advocacy) across installations. School Liaison Officers (Discussed by 20 of 38 participants): Serve as the primary point of contact for school-related matters as well as assist military families with school issues. Several participants noted that they received no response to their request for assistance from their School Liaison Officer or they only received general information. Several participants said School Liaison Officers were not helpful. Some participants found School Liaison Officers were helpful. Some participants were unaware of School Liaison Officers being available at their installation and the service(s) they provide. A few participants said School Liaison Officers did not follow up on requests for information. A participant noted there seems to be a disconnect between family support services provided through the EFMP and services provided by School Liaison Officers. Family Support Personnel (Discussed by 12 of 38 participants): Provide information and referral to military families with special needs. Some participants at one installation noted that the EFMP was understaffed. Some participants at one installation noted high turnover of family support personnel. Some participants noted family support personnel did not provide support for their family with special needs. Stigma (Discussed by 12 of 38 participants): A perception that participating in the EFMP may limit a soldier’s assignment opportunities and/or compromise career advancement. Several participants believe there is still stigma associated with participating in the EFMP. Some participants said participating in the EFMP has not affected career advancement. Assignment Coordination (Discussed by 10 of 38 participants): The assignment of military personnel in a manner consistent with the needs of armed forces that considers locations where care and support for family members with special needs are available. Some participants found the assignment coordination process challenging. Some participants described limitations with the assignment coordination process. A few participants noted there is a lack of information among families with special needs regarding how to express the need for stabilization and /or continuity of care. A few participants cited the challenges of assignment coordination as contributing to their decision to retire. One participant commented that the opinion of a medical professional was not reflected in the assignment coordination process. Special Education Services (Discussed by 10 of 38 participants): The provision of staff capable of assisting families with special needs with special education and disability law advice and/or assistance and attendance at individualized education program (IEP) meetings where appropriate. Several participants who had a family support provider assist them with preparing for or attending a school-based meeting, including IEP meetings, spoke positively of their experience(s). Some participants at one installation agreed that assistance from family support providers during meetings with school officials regarding special education services is helpful. A few participants who were unable to get assistance with special education services from the EFMP sought the services of private attorneys at their own expense. Family Support Services (Discussed by 9 of 38 participants): The non-clinical case management delivery of information and referral for families with special needs, including the development and maintenance of a services plan. Some participants found that family support providers were helpful. Some participants could not identify needed resources or were unaware of the resources or services available to them. One participant noted that the family support provider had minimal contact. One participant said navigating the system can be challenging. Surveys (Discussed by 8 of 38 participants): The process of collecting data from a respondent using a structured instrument and survey method to ensure the accurate collection of data. Several participants noted that they had not or rarely had the opportunity to evaluate the family support services provided through the EFMP. One participant noted that comment cards used by each service are not effective for evaluating the EFMP. Warm hand-off (Discussed by 6 of 38 participants): Assistance to identify needed supports or services and facilitating the initial contact or meeting with the next program. Many participants at one installation agreed that the warm hand-off process worked well for them. Several participants said they found the warm hand-off process helpful when moving from one installation to the next. Outreach (Discussed by 5 of 38 participants): Developing partnerships with military and civilian agencies and offices (local, state, and national), improving program awareness, providing information updates to families, and hosting and participating in EFMP family events. Some participants found it difficult to obtain information regarding the types of family support services that are available. A few participants noted that communications regarding the EFMP were not targeted to address their needs. A few participants noted communications regarding the EFMP are untimely, (e.g., newsletters not issued periodically). Joint Base Family Support Services (Discussed by 1 of 38 participants): Family support services provided by the lead Service of the Joint Base that is different from that of the servicemember enrolled in the EFMP. One participant said that using family support services on joint bases may pose a challenge as each Service has different rules and procedures and as a result provides different types of family support services. In addition to the contact named above, Bill MacBlane (Assistant Director), Brian Egger (Analyst-in-Charge), Patricia Donahue, Holly Dye, Robin Marion, James Rebbe, Shelia Thorpe, and Walter Vance made significant contributions to this report. Also contributing to this report were Lucas Alvarez, Bonnie Anderson, Connor Kincaid, Brian Lepore, Daniel Meyer, and Mimi Nguyen.

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

Answer: 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.