OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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Special Inspector General for IRAQ Reconstruction

SIGIR

For more information, contact SIGIR Public Affairs at 

(703) 428-1100 or PublicAffairs@sigir.mil Special Inspector General for Iraq Reconstruction

Summary of Report: SIGIR 10-022 

Why SIGIR Did this Study 

This report addresses the Department of State’s

(DoS) management of a $50 million grant to the 

International Republican Institute (IRI) for 

democracy-building activities in Iraq. This is 

the largest grant awarded to IRI by Grants 

Officers from the Bureau of Administration, 

Office of Acquisitions Management (AQM) on 

behalf of the Bureau of Democracy, Human 

Rights, and Labor (DRL). Because DRL does 

not have dedicated Grants Officers, it relies on 

AQM to award and amend its grants. However, 

DRL does provide a Grants Officer 

Representative who assists the Grants Officer in 

overseeing the grant. 

The grant is intended to support governance, 

political participation, and civil society 

programs in Iraq. In a prior audit, SIGIR found 

that grantee security costs were significant, and 

DRL did not have documentation on whether 

grants were meeting goals (SIGIR 10-012). 

In this follow-up audit, SIGIR’s objectives are 

to examine for grant 209, the reasonableness, 

allocability, and allowability of IRI’s claimed 

security costs, and the extent to which the 

grantee documented its success in achieving 

governance, political participation, and civil 

society goals and objectives. 

What SIGIR Recommends 

SIGIR recommends that the U.S. Secretary of 

State take a number of actions to improve grant 

management to include ensuring that there are 

sufficient numbers of grant officers to manage 

DRL grants, adequate training for grant 

oversight officials, and clear lines of authority 

and responsibility. 

Management Comments 

In written comments on a draft of this report, 

DRL, with AQM input, concurred with five of 

our six recommendations. It did not concur with 

a recommendation that grants officers review 

IRI cost allocation methods, but stated it and 

AQM would request an audit by the DoS Office 

of the Inspector General. SIGIR believes the 

actions identified by management are responsive 

to this report’s recommendations. 

July 29, 2010 

IMPROVED OVERSIGHT NEEDED FOR STATE DEPARTMENT GRANTS 

TO THE INTERNATIONAL REPUBLICAN INSTITUTE

What SIGIR Found 

Weaknesses in DoS’ oversight of IRI’s compliance with federal and DoS 

grant requirements left DoS vulnerable to paying excessive charges and 

having insufficient information on exactly what was achieved. Existing DoS 

monitoring mechanisms did not detect questionable charges and allocations

associated with certain security and indirect costs against the grant. DoS 

Grants Officers were not actively involved in overseeing the grant or grantee

decision-making and required annual audits and progress reports provided 

only limited insight into grantee practices. Grants Officers were not 

consulted on the appropriateness of grantee practices though they were the 

only officials in the Department authorized to make such rulings. Grantee 

officials stated that they were operating in good faith and sought to ensure 

the appropriateness of their approach by maintaining regular 

communications with the DRL Grants Officer Representative about how 

they were spending the money. However, DRL officials were not authorized 

to approve such actions and did not consult the Grants Officer on these 

issues. This combination of lax oversight, incomplete knowledge of 

regulations, and confusion regarding the authority, roles, and responsibilities 

of DoS officials permitted a number of potentially erroneous decisions to continue unchecked. Specifically, our examination raises a number of questions 

about the reasonableness, allocability, and allowability of some security and 

indirect costs. We found certain IRI charges and allocations lacked: 

• adequate procurement documentation which prevents us from 

determining the reasonableness of the security costs

• a methodology for allocating security costs that assures reasonable 

distribution of the costs among its various grants

• an appropriate accounting methodology to determine some indirect 

cost amounts 

• prior approval from the Grants Officer to purchase approximately 

$690,000 in vehicles

The grantee can readily document activities it sponsored to foster democratic 

goals and objectives in Iraq, but it has not uniformly assessed the extent to 

which it has succeeded in meeting the grant’s goals and objectives as 

required by the grant agreement. To illustrate, the grantee surveyed

candidates who attended training and found that trainees were twice as likely 

to be elected as those who had not participated. On the other hand, the 

grantee did not assess the extent to which its efforts helped women become 

more integrated into political party organizations as officers, candidates and 

volunteers. The grant’s evaluation plan did not always include benchmarks 

and measurable indicators of progress which are essential criteria to measure 

impact. The Grants Officer Representative stated that IRI has not provided 

comprehensive impact assessments, but she has sufficient information from 

other sources to conclude that the grantee is meeting grant goals. DRL also 

noted it has recently taken steps to improve monitoring and evaluation of 

future grants. Without comprehensive assessments, it is difficult for 

decision makers to determine what changes are necessary to best ensure that 

activities are designed and implemented to achieve program objectives. 
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

400 Army Navy Drive • Arlington, Virginia 22202

July 29, 2010 

MEMORANDUM FOR U.S. SECRETARY OF STATE

SUBJECT: Improved Oversight Needed for State Department Grant to the International 

Republican Institute (SIGIR 10-022) 

We are providing this report for your information and use. It primarily pertains to the Bureau of 

Democracy, Human Rights, and Labor (DRL), and Bureau of Administration, Office of 

Acquisitions Management oversight of DRL grants to the International Republican Institute. We 

performed this audit in accordance with our statutory responsibilities contained in Public Law 

108-106, as amended, which also incorporates the duties and responsibilities of inspectors 

general under the Inspector General Act of 1978. This law provides for independent and 

objective audits of programs and operations funded with amounts appropriated or otherwise 

made available for the reconstruction of Iraq, and for recommendations on related policies 

designed to promote economy, efficiency, and effectiveness and to prevent and detect fraud, 

waste, and abuse. This audit was conducted as SIGIR Project 1007a. 

The Bureau of Democracy, Human Rights and Labor provided written responses to the 

recommendations in a draft of this report. Their responses incorporated input from the Bureau of 

Administration, Office of Acquisition Management. We have included their comments in 

Appendix E. We also obtained technical comments and addressed them in the report as 

appropriate. 

We appreciate the courtesies extended to our staff. For additional information on the report, 

please contact David Warren, Assistant Inspector General for Audits, (703) 604-0982/ 

david.warren@sigir.mil or Glenn Furbish, Principal Deputy Assistant Inspector General for 

Audits, (703) 604-1388/ glenn.furbish@sigir.mil. 

Stuart W. Bowen, Jr.

Inspector General

cc: Under Secretary of State for Democracy and Global Affairs

Under Secretary of State for Management

Assistant Secretary for Democracy, Human Rights, and Labor

Assistant Secretary for Administration

U.S. Ambassador to Iraq 

Secretary of Defense

Commander, U.S. Central Command 

Commanding General, U.S. Forces-Iraq
Table of Contents

Introduction 1

Background 1

Objectives 5

Existing DoS Oversight and Monitoring Mechanisms Did Not Detect 

Questionable Charges and Allocations 7

Reasonableness of High Cost, Non-competitive Security Contract 

May Be Questionable 7

Allocation of Security Costs among State Department Grants Does Not Appear 

Reasonable or Substantiated 9

Indirect Costs Appear To Have Been Overcharged 10

Vehicles Purchased Without Grants Officer Approval 11

Oversight and Monitoring Needs To Be Improved 12

Limited Assessments of Success in Meeting Grant Objectives 14

Grant Activities 14

Activities Documented but Records Inconsistent 15

Grant Impact Has Generally Not Been Assessed 17

Conclusion and Recommendations 23

Conclusion 23

Recommendations 23

Management Comments and Audit Response 24

Appendix A—Scope and Methodology 25

Appendix B—Supporting Documentation Review Results 27

Appendix C—Acronyms 29

Appendix D—Audit Team Members 30

Appendix E—Department of State – Bureau of Democracy, 

Human Rights, and Labor Comments 31

Appendix F—SIGIR Mission and Contact Information 34
1 

Improved Oversight Needed for State Department Grant 

to the International Republican Institute

SIGIR 10-022 July 29, 2010 

Introduction 

On January 26, 2010, the Special Inspector General for Iraq Reconstruction (SIGIR) issued a 

report1

This follow-up report examines DoS management of IRI’s largest grant from DRL.

 on the Department of State’s (DoS) Bureau of Democracy, Human Rights, and Labor’s 

(DRL) management of 12 grants awarded between 2004 and 2009. Those grants, valued at 

approximately $248 million, were awarded to the International Republican Institute (IRI) and the 

National Democratic Institute for democracy-building activities in Iraq. That audit found that the 

grants had significant security costs, and DRL did not have sufficient documentation on whether 

the grants were meeting their goals and whether the grant funds were being used in the most 

effective and efficient manner. However, IRI and the National Democratic Institute officials 

assured us they had assessments of their success and that the security costs were reasonable 

under the unique circumstances in Iraq. 

2

 This report 

focuses on DoS oversight of the grantee’s security costs and impact assessments for a grant, 

valued at $50 million.3

Background 

 The grant funds are to be used to support democracy, rule-of-law, and 

governance programs in Iraq. 

DRL’s mission is to lead U.S. efforts to promote democracy, protect human rights and 

international religious freedom, and advance labor rights globally. DRL awards grants to 

conduct democracy-building activities in Iraq. Because DRL does not have dedicated Grants 

Officers (GO), it relies on the Bureau of Administration, Office of Acquisition Management to 

award and amend its grants. 

Office of Management and Budget (OMB) circulars provide the standards, policies, 

requirements, and guidance that federal agencies and grant recipients must follow in 

administering grant programs. They reflect the relatively limited levels of federal involvement 

and place most of the grant management responsibilities on the recipient. Between August 2004 

and April 2010, DRL awarded eight grants to IRI valued at approximately $131 million.

 

1 Department of State Grant Management: Limited Oversight of Costs and Impact of International Republican 

Institute and National Democratic Institute Democracy Grants, SIGIR 10-012, 1/26/2010. 2 SIGIR is conducting a similar review of the largest DRL grant to the National Democratic Institute.

3 Grant S-LMAQM-07-GR-209, awarded 9/12/07. 
2 

Differences between Grants and Contracts 

Grants differ from contracts in purpose and level of anticipated government involvement. 

According to OMB, contracts are to be used when the government intends to acquire property or 

services for the direct benefit or use of the Federal Government, but grants may not directly 

benefit the government. The DoS Federal Assistance Policy Manual4

Table 1—Distinction between Assistance (Grants and Cooperative Agreements) 

and Acquisition (Contract) Awards

describes the differences

between assistance awards (grants or cooperative agreements), and acquisition awards. These 

differences are highlighted in Table 1. 

Assistance Awards Acquisition/Contracts

Advance payment allowed if appropriate Pay for delivery after receipt

Technical/Program competed Price must also be considered

Recipient can terminate No contractor has right to terminate

Deliverable is a report or completion of project Product or service required

Guidance from OMB Circulars Guidance from Federal Acquisition Regulations

Source: DoS Federal Assistance Policy Manual, 3/2008. 

The difference in the expected level of U.S. government involvement is addressed in the State 

Department’s Foreign Affairs Handbook.

5

Regulatory Differences between Grant and Acquisition Instruments

 The handbook defines grants as a type of assistance 

instrument that may be used when it is anticipated that there will be no substantial involvement 

between the agency and the recipient during performance, and the principal purpose is the 

transfer of money, property, or services to accomplish a public purpose of support or stimulation 

authorized by federal statute.

Federal oversight requirements of grants are less stringent than those for contracts. To illustrate, 

the Federal Acquisition Regulation requires contractors that are awarded cost-reimbursable 

contracts to provide contracting officers detailed bills or invoices for every cost incurred and 

requires contracting officers to review the invoices to determine if they are appropriate 

expenditures in meeting the terms of the contract. On the other hand, Federal regulations do not 

require similar review for grantee expenditures. Regulations from OMB, specifically OMB 

Circular A–110,6

 

4 DoS Federal Assistance Policy Manual, 3/2008.

 Subpart C, Post Award Requirements, places the day-to-day financial oversight 

responsibility on the grant recipient and limits the extent of financial reporting an agency can 

require to no more than four times a year. Grant recipients usually are required to submit a claim 

to the GO for reimbursement of their costs on a quarterly basis and may also obtain advanced 

payments. 

5 DoS Foreign Affairs Handbook, Volume 4, Handbook 3, Financial Management Procedures Handbook, 

revised 9/06/02. 6 OMB Circular A–110, Uniform Administrative Requirements for Grants and Agreements with Institutions of 

Higher Education, Hospitals, and Other Non-Profit Organizations, revised 11/19/93, as further amended 9/30/99, 

2 C.F.R. Part 215.
3 

The awards process determines the appropriateness of the planned grant expenditures. Annual 

audits conducted by an external audit firm inform the awarding agency about the recipient’s 

financial management.

7

OMB Circular Cost Principles

 OMB guidance requires that when financial issues are brought to the 

attention of the awarding agency, either through an audit or other monitoring mechanism, the 

agency must exercise its funds management responsibilities. For example, OMB Circular 

A–133, Subpart D, Federal Agencies and Pass-Through Entities–Responsibilities, requires that 

the awarding agency review and resolve audit findings within six months after receipt of the 

audit report and ensure that the recipient takes appropriate and timely corrective action.

In addition to Circulars A–110 and A–133, Circular A–122, Cost Principles for Non-Profit 

Organizations,8

Reasonable Costs: a cost is reasonable if, in its nature or amount, it does not exceed that which 

would be incurred by a prudent person under the circumstances prevailing at the time the 

decision was made to incur the costs. The question of the reasonableness of specific costs must 

be scrutinized with particular care in connection with organizations or separate divisions thereof 

which receive the preponderance of their support from awards made by Federal agencies. In 

determining the reasonableness of a given cost, consideration shall be given to: 

establishes principles for determining reasonable, allocable, and allowable costs 

that a non-profit organization can claim against a grant award. We used these criteria in 

performing our work. The circular defines reasonable, allocable, and allowable costs as follows. 

• whether the cost is of a type generally recognized as ordinary and necessary for the 

operation of the organization or the performance of the award

• the restraints or requirements imposed by such factors as generally accepted sound 

business practices, arms-length bargaining, Federal and State laws and regulations, and 

terms and conditions of the award 

• whether the individuals concerned acted with prudence in the circumstances, considering 

their responsibilities to the organization, its members, employees, and clients, the public at 

large, and the Federal Government

• significant deviations from the established practices of the organization which may 

unjustifiably increase the award costs

Allocable Costs: a cost is allocable to a particular cost objective, such as a grant, contract, 

project, service, or other activity, in accordance with the relative benefits received. A cost is 

allocable to a Federal award if it is treated consistently with other costs incurred for the same 

purpose in like circumstances and if it: 

• is incurred specifically for the award 

• benefits both the award and other work and can be distributed in reasonable proportion to 

the benefits received

 

7 OMB Circular A–133, Audits of States, Local Governments, and Non-Profit Organizations, revised to show 

changes published in the Federal Register, June 27, 2003 and June 26, 2007.

8 OMB Circular A–122, Cost Principles for Non-Profit Organizations, revised May 10, 2004. 
4 

• is necessary to the overall operation of the organization, although a direct relationship to 

any particular cost objective cannot be shown 

Allowable Costs: a cost is allowable if it is not specifically stated as unallowable in Circular A–

122, Attachment B, and in certain provisions of Circular A–110; for example alcoholic 

beverages, bad debts, entertainment, and items that require pre-approval of the agency. 

DoS Monitoring Policy Guidance Provides Flexibility in Oversight

DoS’s standard operating procedures note that the relatively limited levels of federal oversight 

requirements do not relieve the Department from its responsibility to monitor the funds it 

allocates and administers. The DoS Federal Assistance Policy Manual, states, for example, that 

its oversight must include continuous review of a grantee’s “programmatic and financial 

management performance.” Moreover, the policy states that the GO and the Grants Officer 

Representative (GOR) should ensure that a recipient is using the funds for the intended purpose, 

charges allowable costs at the appropriate times, and meets all goals. This can include reports, as 

well as interaction with the recipient through meetings, site visits, or correspondence. 

DoS’s Federal Assistance Policy Manual implements the agency’s grant management and 

monitoring requirements.9

• monitoring by telephone or letter 

 The policy manual describes four methods for GOs and their 

representatives to monitor the financial management aspects of assistance awards: 

• periodic financial status and progress reports with their content and frequency determined 

by specific bureau, program and award conditions 

• site visits as warranted by the project/program need or as requested by the recipient to 

substantiate financial progress and compliance with laws, regulations, policies, and to 

provide technical assistance 

• audits which include the annual audits conducted to examine financial and compliance 

matters, and follow-up on any identified material weakness which if not corrected by the 

recipient may be defined as program abuse and lead to suspension or termination 

The manual provides GOs and GORs flexibility in determining the type of oversight mechanism 

to use, and the frequency of its monitoring activities, for each grant. Criteria to judge the extent 

of oversight required includes an assessment of whether the recipient is reliable, has developed a 

well-planned project, and if the expected requirements have been clearly communicated from 

both sides. The manual concludes that if such conditions exist the monitoring can be expected to 

be a simple, positive experience.

Grants Awarded to IRI 

Between August 2004 and April 2010, DRL awarded eight grants to IRI valued at approximately 

$131 million. Table 2 shows those eight democracy-building grants.

10

 

9 Federal Assistance Policy Manual, U.S. Department of State Bureau of Administration, Office of the Procurement 

Executive, Federal Assistance Division (A/OPE/FA), Version 1.1, March 2008. 

 Of those grants, we 
5 

reviewed S-LMAQM-07-GR-209 (grant 209) to support governance, political participation, and 

civil society programs in Iraq, in accordance with the goal and strategic objectives of the U.S. 

Strategy for Democracy in Iraq 2007-2010. To implement the grants, IRI carries out activities 

such as trainings, conferences, and study visits to support development of political parties, 

women and youth outreach, and the use of media in political campaigns. 

Table 2—DRL Grants Awarded to IRI ($ in millions)

Award 

Date Grant Number Project

Grant 

Amount

Expiration

Date

8/10/2004 S-LMAQM-04-GR-133 Political Organization Training $2.2 7/31/2008

6/12/2006 S-LMAQM-06-GR-097

Post-Elections Democratic 

Transitions 37.7 1/30/2008

9/12/2007 S-LMAQM-07-GR-209

Governance, Political Participation, 

and Civil Society a 50.0 8/31/2010

5/12/2008 S-LMAQM-08-GR-549 Women’s Democracy Initiative 1.8 11/12/2009

8/4/2008 S-LMAQM-08-GR-601

Pre-election Activities for Iraqi 

Provincial Elections 19.0 5/31/2010

6/11/2009 S-LMAQM-09-GR-560

Election Assistance Program – 

Iraq 3.0 4/30/2010

12/3/2009 S-LMAQM-10-GR-504

Iraq Elections Assistance and 

Accountability 5.0 5/31/2010

4/16/2010 S-LMAQM-10-GR-535 Post Elections Program 12.0 5/31/2011

Total $130.7

Note:

a 

Source: SIGIR analysis of DRL data, as of 5/11/2010. 

Grant reviewed by SIGIR.

In this report, SIGIR identifies instances where the grantee potentially overbilled or could not 

support certain costs under grant 209. Only the GO has the authority to recover any improper 

payments. 

Objectives 

SIGIR’s objectives are to examine for grant 209, the reasonableness, allocability, and 

allowability of IRI’s claimed security costs, and the extent to which the grantee documented its 

success in achieving governance, political participation, and civil society goals and objectives. 

For a discussion of the audit scope and methodology, see Appendix A. For a list of SIGIR’s 

review of supporting documentation for IRI trainings, see Appendix B. For a list of acronyms 

used in this report, see Appendix C. For a list of the audit team members, see Appendix D. For 

 10 The Iraq Relief and Reconstruction Fund, the Economic Support Fund, and the Human Rights Democracy Fund 

have funded these grants. 
6 

a copy of Department of State – Bureau of Democracy, Human Rights, and Labor comments, see 

Appendix E. For the SIGIR mission and contact information, see Appendix F. 
7 

Existing DoS Oversight and Monitoring Mechanisms 

Did Not Detect Questionable Charges and Allocations

Existing DoS monitoring mechanisms did not detect questionable charges and allocations for

certain security and indirect costs against the grant. The GOs were not actively involved in 

overseeing the grant or grantee decision making. Further, required annual audits and progress 

reports provided only limited insight into grantee financial management practices. The GOs

were not consulted on the appropriateness of certain financial practices though they are the only 

officials authorized to make such rulings. Grantee officials stated that they were operating in 

good faith and sought to ensure the appropriateness of their approach by maintaining regular 

communications with DRL. However, DRL officials are not authorized to approve such actions. 

This combination of lax oversight, incomplete knowledge of regulations, and confusion 

regarding the authority, roles, and responsibilities of DoS officials permitted a number of 

potentially inappropriate actions to occur. Specifically, our examination raised the following 

questions about the reasonableness, allocability, and allowability of some security and indirect 

costs incurred for grant 209. We found certain IRI charges and allocations lacked: 

• adequate procurement documentation which prevents us from determining the 

reasonableness of the security costs

• a methodology for allocating security costs that assures reasonable distribution of the costs 

among its various grants 

• an appropriate accounting methodology to determine some indirect cost amounts 

• prior approval from the Grants Officer to purchase approximately $690,000 in vehicles 

Reasonableness of High Cost, Non-competitive Security Contract 

May Be Questionable 

The cost of a non-competitively awarded security services contract may have been too high, but 

incomplete procurement records prevented us from assessing the reasonableness of the costs. In 

our prior report, we noted that IRI spent more than one half of its grant funds on security.11 The 

grantee awarded a sole-source contract that ran from 2004 through 2009 for private security 

services from Blackwater Security Consulting (Blackwater). However, it could not provide 

evidence that it assessed the appropriateness of the cost as required under federal regulation. 

According to OMB Circular A–110, procurement records and files for purchases above the small 

purchase threshold12 are required to include at a minimum, the basis for selecting the contractor, 

justification for any lack of competition when competitive bids or offers are not obtained, and the 

basis for award cost or price.13

 

11 Department of State Grant Management: Limited Oversight of Costs and Impact of International Republican 

Institute and National Democratic Institute Democracy Grants, SIGIR 10-012, 1/26/10.

 Assessing cost reasonableness is particularly important when a 

grantee elects to award a contract without full and open competition. 

12 OMB defines the small purchase threshold as any purchase exceeding $100,000, in accordance with 41 USC 403. 13 OMB Circular A–110, Subpart C, Paragraph 215.46.
8 

The grantee has records describing the basis for selecting the contractor and a justification memo 

explaining why it used a sole-source contract. However, it did not maintain documentation of 

any price analyses it conducted in making the award. According to its records, the award was 

made to Blackwater in November 2004 after first contracting with Diligence, LLC. The 

grantee’s November 2004 sole-source justification memo explained that its executive 

management determined the organization needed to contract with a company that had greater 

depth of resources and experience and that Blackwater was the only organization that could 

provide that service. The memo indicates the Blackwater contract would be more expensive than 

the Diligence contract and that the grantee recognized the impact that higher security costs have 

on overall program budgets. For this reason, the grantee planned for the contract to initially only 

last through the January 2005 elections (120 days), at which time it would re-evaluate the need 

and appropriate level for security services. However, the grantee continued its contract with 

Blackwater until 2009. 

Nevertheless, there are no records to indicate that the grantee conducted any analysis of the 

reasonableness of costs that Blackwater was charging, nor any reevaluation of the need and 

appropriate level of security services for the grant. Grantee officials explained that they 

determined that the market research they conducted for their previous competitively awarded 

contract provided them sufficient information on which to assess the reasonableness of the 

Blackwater proposal. Moreover, the officials stated that given the severely deteriorating security 

conditions, they were willing to incur higher costs to obtain the best, largest, and most 

experienced security contractor available who would be able to offer a full range of services. 

The justification memo states that the grantee program director and executive management 

conducted an informal cost comparison of private security contractors’ costs charged to similar 

non-profit organizations operating in Iraq. However, the grantee was unable to provide any 

written evidence that such analyses took place. According to an IRI official, it conducted 

regular, informal reviews of the contract and associated costs but did not document these 

assessments. 

Because the cost analysis was not documented, we were unable to assess the reasonableness of 

the contract’s costs. Our work showed that the follow-on competitive contract for the same level 

and type of services was significantly less costly. Specifically, in 2009, the grantee issued a 

Request for Proposal to replace the Blackwater contract after Blackwater lost its license to 

operate in Iraq. Grantee officials also informed us that one of their goals in awarding the new 

contracts would be to lower costs. After a competitive-award process, the grantee awarded two 

contracts: Pilgrims Group Limited was contracted to provide security services to support client 

operations based in Baghdad, and Ardan Energy Services (Ardan) was contracted to provide 

security services primarily in northern Iraq’s Kurdistan region with some tasks in Mosul and 

Kirkuk. The new contracts essentially required the same type of personnel with the same skill 

levels but at much lower pay rates than Blackwater charged. 

The primary factor in the difference between the Blackwater and the subsequent Pilgrims and 

Ardan security contract costs were the rates paid for local Iraqi security guards. To illustrate, we 

evaluated the cost of local Iraqi security guards in Erbil. 
9 

In the January 2008 billing, Blackwater charged a total of $114,470 for 31 guards: 

• $120.11 per day each for 30 Iraqi static security guards

• $212.36 per day for 1 local Iraqi static facilitator

In the February 2010 billing, Ardan charged a total of $33,120 for 34 guards: 

• $50 per day each for 2 local Iraqi guard commanders 

• $50 per day each for 4 local Iraqi control room operators 

• $33 per day each for 8 local Iraqi access control guards 

• $27 per day each for 16 local Iraqi guards 

• $27 per day each for 4 local Iraqi patrol guards 

This data shows that Blackwater charged almost $81,350 more per month, for about the same 

number of guards performing similar duties. After the competition, for this example, IRI is 

paying substantially less to Ardan for what appears to be the same level of security as previously 

provided by Blackwater. 

Grantee officials stated they informed DRL of its intent to non-competitively award the security 

contract to Blackwater and that DRL did not object. However, informing DRL of its intentions 

does not relieve the grantee from the OMB circular requirement to adequately document the 

basis for selecting the contractor, justify the lack of competition when competitive bids or offers 

are not obtained, and provide the basis for award cost or price. 

Allocation of Security Costs among State Department Grants Does 

Not Appear Reasonable or Substantiated

The grantee did not allocate security costs for services that are shared among its grants in a 

manner that assures the costs are distributed in reasonable proportion to the benefits received 

from each grant. The grantee did not follow OMB Circular A–122 which requires that grantees 

allocate costs among grants according to actual usage.

14

During the period under review, the grantee had a number of concurrently-running DRL and 

other federal grants. All of the grants received services by the same private security contractors. 

As of March 2010, the grantee, over two-year period, allocated $21.8 million in security costs to 

the grant 209. According to grantee officials, they arrived at this distribution by dividing 

 Rather, the grantee used its discretion to 

determine how security costs would be distributed among grants. In at least one instance, the 

allocation was based on the availability of funds in the grants—an allocation method not allowed 

by OMB. Such allocations distort the actual financial picture of grants, in some cases increasing 

and in other cases decreasing the amount of funding available for direct program costs. As a 

result, there is no way to determine how much of each grant was actually spent on direct program 

activities versus security.

 

14 OMB Circular A–122, Cost Principles for Non-Profit Organizations, Attachment A, Paragraph A.4. 
10 

security costs among grants in proportion to the amount of work conducted under the grant. 

However, the grantee did not have a written methodology to demonstrate that they objectively 

determined how to allocate costs. The approach used does not appear to comply with OMB costallocation guidance. That guidance requires that an objective methodology be developed that is 

based on direct costs, such as direct labor costs. For example, at given points in time some 

grants may have higher security costs than others because of high levels of travel, concentration 

of work in more dangerous areas, or working with more high-profile Iraqis.

Moreover, in one instance the grantee allocated the amount of security costs charged to a grant 

based upon the amount of funds available under the grant—a method not allowed under OMB 

regulations.15

In discussions regarding the methodology used to distribute funds, IRI officials insisted that they 

distributed the security costs based on the amount of work performed under the grants. 

However, we requested—and IRI could not provide—an objective methodology for distributing 

the funds that met OMB circular requirements. 

 Specifically, the grantee removed approximately $500,000 in security costs it 

initially charged to grant 209 and then charged those costs to grant S-LMAQM-06-GR-097 

(grant 097). In a written response to our question on why this occurred, the grantee stated that it 

initially charged the security cost to grant 209 because it was unaware of how much money 

remained under grant 097. Because grant 097 was nearing expiration, the grantee was concerned 

that if they charged security costs to the grant, total expenditures would have exceeded the 

grant’s total value. Later, when the grantee confirmed that funds remained for grant 097, the 

grantee moved the security costs from grant 209 expenses and recorded them as grant 097 

expenses. This activity appears to violate OMB regulations which state that costs allocable to 

one particular award cannot be shifted to another award to overcome funding deficiencies. 

Indirect Costs Appear To Have Been Overcharged 

The grantee appears to have charged more overhead costs for security contract administration 

than allowed in its grant 209 agreement. This is important as it reduces the amount of funds 

available for direct program costs. 

According to a signed agreement between the grantee and the U.S. Agency for International 

Development (USAID), the grantee is allowed to recover indirect costs associated with the 

administration of any contracts it awards under grants. Indirect costs in this case would include, 

for example, headquarters costs associated with administering the security contract. To ensure 

that the government is not overcharged for these costs, the agreement limits the amount of 

indirect costs that can be applied to contracts awarded using grant funds. Specifically, IRI must 

apply the negotiated indirect cost rate to only the first $25,000 of a contract’s value in any given 

year. 

For grant 209, the grantee used an inappropriate methodology and applied the $25,000 ceiling on 

a monthly rather than an annual basis. The grantee’s reasoning was that the monthly invoices it 

received from the contractor should be viewed as individual contracts. This approach could 

result in the grantee charging its indirect cost rate against $300,000 per year rather than $25,000 

 

15 OMB Circular A–122, Attachment A, Paragraph 4.b.
11 

for the single contract. An example of the effect of this practice is the amount the grantee

charged for the administration of its Blackwater contract in fiscal year 2008. According to the 

negotiated indirect cost agreement, the grantee should have charged 15.81% of the first $25,000 

or $3,952.50 as an indirect cost for all federal grants participating in Blackwater Security. 

Instead, the grantee charged 15.81% of $240,599.97, or $38,038.86, against grant 209 alone—

almost 10 times what it appears was allowed for all grants. In addition to grant 209, the grantee 

had four other grants during fiscal year 2008 that may have been charged similarly for overhead 

for the administration of the fiscal year 2008 Blackwater contract. However, because of the 

previously discussed approach used by the grantee to allocate its security costs and the scope of 

our audit, we did not determine the amount of potentially questionable costs associated with this 

practice. 

Grantee officials said that they discussed their approach for charging indirect cost rates with the 

appropriate USAID official and that the USAID official approved their methodology. The 

grantee also provided us emails of these discussions. We reviewed these emails and found that 

they did not specifically state that the organization would treat each monthly invoice as a 

separate contract. Also, the USAID official who set the indirect cost rates informed us that a 

contract is for a specific period of performance, and each monthly invoice is not a separate 

contract and that in her view, the grantee’s interpretation is incorrect and unallowable. 

Vehicles Purchased Without Grants Officer Approval 

The grantee did not follow OMB Circular A–122 requirements that it obtain agency approval 

before it purchased vehicles, valued at $689,500, through a capital-lease arrangement with its 

security contractor. SIGIR is not questioning the need for vehicles but notes that stringent 

requirements are in place to ensure that grant recipients use money for intended purposes. 

Further, grantees should not profit from purchases as this arrangement has the potential to do; if 

the vehicles are eventually sold, the grantee could recoup money from the sale. Grantee officials 

said they acted in good faith after discussing their approach with DRL program officials. The 

grantee did not, however, obtain approval from the GO who is the only official authorized to 

approve such a purchase. 

Specifically, the grantee purchased, through a capital lease with Ardan, six armored vehicles and 

four soft-skinned vehicles at a total cost of $689,500, without obtaining prior approval from the 

GO.

16

Grantee officials stated they did not believe the lease of the vehicles was a capital lease. 

However, our analysis of the arrangement made with Ardan indicates otherwise. The 

arrangement called for Ardan to procure the vehicles after which it would recover the cost of the 

purchases over the 5-month life of the original contract. This means that after five months the 

grantee would pay Ardan for the full cost of the vehicles and the grantee could then own the 

vehicles. Generally Accepted Accounting Principles, which are incorporated into OMB Circular 

A–122, defines this type of financing arrangement as a capital lease, and it is therefore 

unallowable under OMB regulations without prior approval by the GO. The grantee’s full 

payment of 100% of the cost of the vehicles in the first five months of the lease meets the criteria 

 Of that amount, $275,800 was charged to grant 209. 

 

16 OMB Circular A–122, Attachment B, Paragraph 15 b.
12 

for a capital lease. As a result, we are questioning the allowability of 40% of the $689,500 of the 

costs IRI allocated to grant 209 or $275,800. Given that the remaining vehicle costs were 

charged to the two other DRL grants, we are questioning $275,800 charged to grant number 

S-LMAQM-08-GR-601 and $137,900 charged to grant number S-LMAQM-09-GR-560. 

Oversight and Monitoring Needs To Be Improved

Existing DoS oversight and monitoring mechanisms did not prevent, or ultimately detect, the 

grantee’s potentially questionable costs. This situation occurred for a variety of reasons. First, 

the GOs were not sufficiently involved in grantee decision-making. They informed us, for 

example, that neither the grantee nor the GOR had contacted them about the issues raised in this 

report. Moreover, they told us they do not receive information from the GOR, such as GOR 

analyses of grantee quarterly reports. Severe staff shortages also inhibited their ability to 

actively engage with the grantee. They noted that in 2007 and 2008, while this grant was active, 

the number of GOs decreased from five to one. While the number of GOs has since increased, 

adequate staffing remains a problem with each officer responsible for approximately 250 open 

grants. 

Financial information available to the Department was also insufficient to detect questionable 

costs. As discussed in our prior audit report, the periodic financial reports that OMB requires 

were not designed to achieve this purpose.17

A GO site visit did not identify the problems we noted. One GO, along with DoS Financial 

Management Resources and Grants Policies officials, visited IRI headquarters one time over the 

life of grant 209, in April 2010. The purpose of the visit was to determine for three DRL grants 

whether the grantee was in compliance with applicable OMB Uniform Administrative Practices 

and the Terms and Conditions of the federal assistance awards. The review committee wrote IRI 

that it was impressed with the grantee’s grants management practices, including outstanding 

accounting procedures, up-to-date grants training for staff, and thorough vetting procedures for 

overseas sub-recipients. According to the GO, the review committee presented two minor issues 

to IRI: the grantee did not have adequate written policies and procedures for procurements, 

particularly for awarding non-competitive contracts, and the organization’s grant files did not 

contain all needed documentation. According to the official, the grantee provided sole source 

justification and satisfactory explanation of why their paper files are limited to award and 

amendment documentation. Based on this information, the issues were not included in the 

review committee’s letter to the grantee. In responding to our question as to why the visit had 

not detected any of the problems we noted, the GO responded that the visit was intended to be a 

broad review of policies. 

Annual audits of the grantee also provided no insight to the problems that we identified. 

Conducted by private Certified Public Accounting firms, OMB Circular A–133 audits are 

primarily audits of an organization’s financial statements and general compliance with OMB 

circular requirements. The audit is high level and organization-wide. In addition, the 

compliance aspect of the audit is done on a risk basis, selecting only major programs and 

 

17 Department of State Grant Management: Limited Oversight of Costs and Impact of International Republican 

Institute and National Democratic Institute Democracy Grants, SIGIR 10-012, 1/26/10.
13 

examining the highest-risk financial transactions within those programs. Unless specifically 

directed to do so by a funding agency, it is unlikely that an A–133 audit for a large, worldwide 

entity like IRI would cover a particular program or grant. Therefore, the annual audit reports, by 

their nature, would not necessarily provide DoS the detail it needs to monitor a particular grant. 
14 

Limited Assessments of Success in Meeting Grant

Objectives

The grantee assessment data for meeting objectives is limited and makes it difficult to fully 

assess the grant’s impact. The grantee can readily document what activities it led to foster 

democratic goals and objectives in Iraq. SIGIR confirmed that in most cases the grantee 

maintained comprehensive information on its training, number, and type of participants, though 

in some cases this data did not precisely match that contained in quarterly reports. The grantee 

has not, however, uniformly assessed the extent to which it has succeeded in meeting the grant’s 

specific goals and objectives. Such analyses are required to be included in quarterly reports to 

DRL. Moreover, IRI’s evaluation plan does not always include benchmarks and measurable 

indicators of progress which are essential criteria for measuring impact. 

While the GOR stated that the grantee has not provided comprehensive impact assessments, she 

further noted that she has sufficient information from other sources to conclude that the grant’s 

overall goals are being met. DRL also noted it has recently taken steps to improve monitoring 

and evaluation of future grants. Without comprehensive assessments, it is difficult for decision 

makers to determine what changes are necessary to best ensure that activities are designed and 

implemented to achieve program objectives. 

Grant Activities 

Under grant 209, the grantee conducts program activities such as trainings and study missions 

with Iraqi political parties, civil society groups, and members of the Iraqi government to support 

the development of democracy. Trainings included capacity-building efforts like instruction on 

writing project proposals and legislative drafting and monitoring for Iraqi civil society 

organizations. Study missions included a trip for members of the Council of Representative 

Research Directorate to attend a meeting of the International Federation of Library Associations 

in Ottawa, Canada. See Figure 1 for a photo of grantee training on conducting surveys. 
15 

Figure 1—IRI Training Session in Erbil

Source: IRI 5/2010.

Activities Documented but Records Inconsistent 

The grantee documented activities associated with trainings for grant 209 with payment receipts, 

agendas, and sign-in sheets. For grant 209, DoS required that the grantee submit program 

progress reports and suggested that reports include supporting documentation or products related 

to project activities (such as articles, meeting lists and agendas, and manuals). However, DoS 

did not specify what documentation must be maintained as support that activities occurred. 

SIGIR previously reported DRL records contained most of the required reports from the grantee, 

but the grantee did not include supporting documentation for nearly all of their reports. 

According to grantee officials, the reports do not include supporting documentation in order to 

lessen the burden for DRL, but that information is always available and can be reviewed by 

GORs during site visits. 

Records Contain Evidence of Activity

The grantee informed SIGIR that as of April 14, 2010, it had conducted 271 trainings for more 

than 5,000 Iraqi participants and 3 study missions in support of the objectives for grant 209. 

Further examination of grantee records showed 3 additional out-of-country trainings conducted 

by the grantee that were not recorded in its database of all grant trainings. The trainings included 

two trainings in Turkey on public opinion research and budgeting, as well as a training in 
16 

Lebanon on the use of information technology. According to a grantee official, these three 

trainings were conducted under grant 209, but due to an oversight, were not included in the list 

of trainings. 

SIGIR judgmentally selected for review 28 of the 271 (approximately 10%) grantee-recorded 

trainings. Although the grantee provided some type of supporting documentation for each 

activity, SIGIR found some variation in the type of documentation provided as support. The 

grantee’s field accounting manual requires receipts for all expenses over $1518

The grantee provided receipts for the 28 trainings SIGIR reviewed but did not always have 

agenda and sign-in sheets. One training file did not contain all receipts for the activity, but the 

grantee had documented unsuccessful attempts to obtain receipts from the trainer, as required by 

its policy. SIGIR found five trainings that did not have agendas or had agendas with a different 

title or date from grantee records. The grantee subsequently provided the three agendas as well 

as agendas for the other two trainings, but those agendas still did not match IRI’s records. 

as well as 

agendas for meetings, conferences, and seminars, but it does not require other documents such as 

sign-in sheets as evidence an activity occurred. 

In addition, SIGIR’s initial review found that five grantee files were missing participant sign-in 

sheets for at least one day of training. The grantee provided explanations for the missing 

documentation: three of the trainings occurred outside Iraq, and IRI used hotel receipts as 

support of participation; one training that occurred over two days had only one sign-in sheet; and 

supporting documentation for one training had signatures for transportation per diem received by 

participants. The grantee explained that the instructor did not collect signatures for an official 

sign-in sheet. See Appendix B for the detailed results of SIGIR’s document review. 

Records Inconsistent with Quarterly Reports

SIGIR could not verify the information reported by the grantee in its quarterly reports to DRL. 

We compared the sample of grantee training records conducted with grantee quarterly reports 

submitted to DRL. Of the 28 trainings reviewed, SIGIR was unable to find mention of 5 in the 

quarterly reports to DRL. For example, grantee records indicate that in April 2008, IRI 

conducted training on fostering international relationships for women from the North Youth 

Center, but SIGIR did not find this training noted in the grantee’s quarterly report. See 

Appendix B for a full list of the extent to which grantee quarterly reports included information 

on the trainings in SIGIR’s sample. 

Similarly, SIGIR found some instances where information presented in quarterly reports was not 

corroborated by grantee records. For example, the quarterly report for the period ending 

June 30, 2008 describes a training in Istanbul, Turkey for senior staff members of the Presidency 

Council. According to the report, a U.S.-based trainer taught management skills and leadership 

development, and staff members included advisors, financial administrators, and office 

managers. SIGIR was unable to find this training listed in grantee records of trainings for 

grant 209 or its list of out-of-country trainings. 

 

18 Receipts are required for all expenses over $15, except taxi-cab receipts, which are required for expenses over 

$25. 
17 

State Has Not Reviewed Supporting Documentation 

SIGIR previously reported that GORs communicate regularly with grantees, but the frequency 

and length of site visits has been affected by limited DRL staffing, travel cost considerations, 

security, and country clearance restrictions. As of April 30, 2010, the GOR had responsibility 

for 12 grants including grant 209, totaling approximately $197.4 million. DRL gains additional 

insight to grantee activities through two democracy advisors who communicate with and visit 

grantees but do not conduct formal oversight of grantees. According to grantee officials, GOR 

site visits have been limited, but grantee officials in Iraq maintain regular communication with 

the democracy advisors who have also made visits to the grantee’s office in Erbil. 

These visits by the GOR and the democracy advisors have not included review of grantee 

documents which support quarterly reports to DRL and serve as evidence that activities occurred. 

In addition, even though the GO would be able to make site visits to grantee offices in 

Washington, D.C., the GO for IRI’s grants has conducted only one visit to IRI, and the review 

was a high level review of policies. As noted earlier, GOs have approximately 250 active grants 

each, so they rely on GORs to identify issues. 

Grant Impact Has Generally Not Been Assessed

The grantee generally has not assessed the extent to which progress has been made in meeting 

grant goals and objectives. While the grantee collected some information on impact, it did not 

always clearly demonstrate a change in condition or link reported impact to grantee activities. 

According to the Foreign Assistance Policy Manual, impact is defined as the cumulative or net 

effect of the outcomes or results, and there is an abiding U.S. government interest in measuring 

the success of programs supported by federal funds. The grant agreement requires that such 

impact analyses be included in quarterly reports. Since our analysis for our previous report, the 

grantee has submitted three quarterly reports to DRL that contain detailed information, including 

photos, results from initiatives like polling, and additional output data. 

Our review of those quarterly reports noted instances where the grantee reported a measured 

indication of change resulting from its activities; however, there were other instances where one 

would expect to see a measured impact, but the grantee did not provide evidence of any. For 

example, the grantee reported that after the March 7, 2010 election, it conducted a survey of 

candidates who attended election training and found that campaigns assisted by the grantee were 

twice as likely to succeed as those that did not. The grantee further found that successful 

candidates conducted more door-to-door voter outreach and maintained larger voter databases 

than losing candidates. 

Conversely, the grantee indicated that success in meeting the outcome that women are 

increasingly integrated into party organizations as officers, candidates, and volunteers would in 

part be demonstrated when women effectively campaign in elections. While the grantee reported

that hundreds of women trained before the March 7 elections conducted effective campaigns, it 

did not provide any other supporting information to indicate it measured a change in condition. 

Moreover, the grantee did not provide detail about the women’s roles in parties or what made the 

campaigns effective. Without the grantee’s demonstration of specific measurements for changes 
18 

in activity, it is difficult to determine if the grantee assessed the extent to which progress has 

been made toward goals and objectives. 

SIGIR recognizes that collecting information and measurements in Iraq to show impact is 

challenging. According to the GOR, it can be difficult for grantees to demonstrate impact 

because progress toward goals and objectives is often subjective, some activities may not 

immediately effect change, and observation of change may be delayed even beyond the life of 

the grant. She further indicated that the lack of available data in Iraq has hindered grantees in 

establishing a baseline against which they can measure progress. According to a grantee official, 

some measures of progress overlap with multiple grants, so it can be difficult to identify the 

impact of one specific grant. While the GOR acknowledged that the grantee has not provided 

comprehensive impact assessments, she informed us that she has sufficient information from 

other sources to conclude that IRI is achieving the overall grant goals. 

According to a grantee official, IRI will draw conclusions in its final report which it will submit 

within three months after the grant’s expiration. The final report will compile the findings in the 

quarterly reports as well as include a final assessment of the grant’s effectiveness and impact. 

According to the official, this report should be able to draw more definitive and broad 

conclusions than quarterly reports because it will look at the entire life of the grant. 

Other Information on Activities

The grantee collected information on voter sentiment and participants, but this data has not been 

used to assess progress toward meeting goals and objectives. In 2009, the grantee conducted 17 

trainings for more than 450 Iraqi participants on polling and building local capacity. In

November and December 2009, those participants conducted individual interviews in all 18 

provinces, utilizing a 75-question survey for a total sample size of 7,600 people. Results from 

the survey have been used to inform the grantee’s re-election voter education programs and 

political parties. For instance, the poll identified provinces with the lowest likely voter turnout 

which allowed the grantee to target voter education efforts, resulting in a higher-than-average 

turnout, according to the grantee. 

The grantee also maintains a database of all people who have participated in trainings for 

grant 209 and a summary of their evaluations of trainings and trainers filled out after each 

training session. The grantee began collecting this information in February 2008, cumulating 

information from each of the activities under all IRI grants into one database. Grantee records 

show that between February 2008 and early May 2010,19

 

19 Even though the grant was awarded in September 2007, the grantee and DRL agreed work would not begin until 

January 2008. The grantee did not begin collecting participant information for the grant until February 2008. 

it conducted over 250 trainings for 

almost 6,000 participants. According to a grantee official, however, individuals are entered into 

the database each time they attend a training, so the total number of participants may count the 

same person multiple times. The grantee collects information on individuals’ political parties, 

provinces, gender, and which trainings they attended. Figure 2 shows the number of participants 

in grant 209 trainings by province between February 2008 and May 2010. 
19 

Figure 2—Number of Grant 209 Training Participants by Province 

(February 2008 – May 2010)

Source: IRI, May 7, 2010.

Monitoring and Evaluation Plan Not Structured To Measure Impact 

The request for proposals that resulted in the awarding of grant 209 to the grantee states that 

proposals would be judged in part on the merit of the proposed program evaluation plan. 

According to the request, proposals should demonstrate the capacity for engaging in impact 

assessments and providing long and short-term goals with measurable outputs and outcomes. 

The request defines outcomes as specific results a project is intended to achieve that are usually 

measured as an extent of change. In addition, the grant 209 agreement states that grantee 

quarterly progress reports should reflect the grantee’s continued focus on measuring project 

impact on the overarching goals or problems the projects set out to address. Assessment of 

overall impact and/or incremental impact, as appropriate, should be included in each quarterly 

progress report. Moreover, the solicitation for the grant stated the potential grantee should 

demonstrate the capacity for engaging in impact assessments and providing long- and short-term 

goals with measurable outputs and outcomes. DRL defines impact as a change in social, 

economic, or civic condition. 

In its application to receive grant 209, the grantee included 14 expected outcomes of their work 

toward meeting 6 objectives. The grantee also included 43 indicators under the outcomes that 

would show progress toward meeting the outcomes and eventually the objectives. However, not 

all of the outcomes and indicators were specifically measurable. For example, for meeting the 

objective of strengthening the organizational capacity, sustainability, and accountability of civil 

society to effectively engage in the democratic process, the grantee expected their work to result 

in civil society organizations beginning to experience healthy organizational growth while 

effectively engaging in the democratic process. However, the grantee did not describe any 

techniques for measuring progress for the indicators or determining when outcomes have been 

met. The grantee’s previous country director stated the indicators were vague and were not 

0

100

200

300

400

500

600

700

800

900
20 

suited to day-to-day management of the grant, but that the grantee has some measurements to 

determine grant impact. Another grantee official stated the grantee uses the indicators 

established in the agreement, but some measurements of progress do not fit into an indicator. As 

of April 14, 2010, the grantee reports it completed 271 trainings under grant 209, including 223 

trainings under objective 5 to encourage movement towards internally democratic, sociallyintegrated and issues-based political organizations. See Table 3 for information on the grant 

objectives and expected outcomes. 
21 

Table 3—Objectives, Outcomes, and Number of Trainings for Grant 209

Objective and Outcome

Number of 

trainings by 

Objective

Objective 1: Enhance government capacity to perform core functions of 

national institutions.

4 

Outcome: Foster development of the Iraqi Council of Representatives 

Research Directorate departments to ensure that the directorate continues to 

advance as a quality, objective information service for all Council of 

Representatives members, committees, and staff.

Outcome: Support greater transparency, a commitment to public dialogue 

and responsiveness in the public policy-making process on the part of 

legislature and government.

Objective 2: Foster transparency, public dialog, and responsiveness in the 

legislative process.

2 

Outcome: Support development of non-governmental, non-partisan, nonsectarian public policy think tanks, particularly on economic policy and 

security issues, and facilitate their participation in the policy-making process.

Objective 3: Strengthen the organizational capacity, sustainability, and 

accountability of civil society to effectively engage in the democratic process.

37

Outcome: Civil society organizations start to experience healthy 

organizational growth, while effectively engaging in the democratic process.

Outcome: Iraqi youth start participating in public life.

Outcome: Iraqi women’s groups actively engage in the political and 

legislative processes to protect their rights.

Outcome: Ethnic and religious minority activists actively engage in the 

political and legislative processes to protect their rights and attain equal legal 

status with majority groups. 

Objective 4: Encourage and facilitate dialogue among Iraqi civil society, Iraq 

local and national government, and international actors.

5 

Outcome: Civil society organizations start to influence decision-makers from 

all levels of government and engage international actors to facilitate this 

process.

Outcome: Civil society organizations play key roles in reducing political 

violence through inter-sectarian and inter-ethnic dialogue.

Objective 5: Encourage movement towards internally democratic, sociallyintegrated and issues-based political organizations.

223

Outcome: Iraqi political parties regularly and effectively practice two way 

communications with voters as the way to retain their base, broaden it and 

keep the public informed both about their platforms and their agendas.

Outcome: Iraqi political parties and party leaders engage in party building 

and implement issues-based political outreach, including the use of public 

service announcements, to promote issues-based discourse through a 

variety of print and electronic media outlets. 

Outcome: Women are increasingly integrated into party organizations as 

officers, candidates, and volunteer activists.
22 

Outcome: Youth are increasingly integrated into party organizations as 

officers, candidates, and volunteer activists. 

Objective 6: Facilitate the development of institutions, laws, and procedures 

that promote free and fair elections. 

0

Outcome: Political parties are able to effectively monitor elections and 

produce credible assessments of electoral procedures and outcomes. 

a 

Total 271

Note:

a 

Source: SIGIR analysis of IRI data, as of 4/14/2010.

IRI and DRL agreed that IRI would not conduct any trainings for objective 6 so as not to duplicate efforts of the National 

Democratic Institute.

Plans To Assess Impact of Future Grants

SIGIR previously reported that DRL officials were taking steps to improve the quality of their 

evaluation process and determine methods to measure the impact of grant programs and assess 

the overall impact of DRL’s work. In March 2010, DRL published on its website updated 

proposal submittal instructions and included a monitoring and evaluation plan primer with a 

sample monitoring and evaluation plan. The primer states that all proposals being considered for 

DRL funding must include a comprehensive monitoring and evaluation plan. Monitoring and 

evaluation plans consist of indicators with baselines and targets; means for tracking critical 

assumptions; plans for managing the data collection process; and regular collection of data. 

Grantees should schedule and carry out evaluations throughout the course of the program. Plans 

should include performance indicators linked to the program’s strategic objectives with 

performance measures that are specific, measurable, attainable, realistic, and timely. 

DRL also developed standard output-oriented indicators under the Foreign Assistance 

Framework.20 The primer states that grantees are required to report on relevant DRL indicators 

in addition to their own program-specific indicators by each quarter and cumulative over the life 

of the grant. According to an IRI official, DRL’s new monitoring and evaluation requirements 

will be incorporated into future grantee proposals for DRL grants. 

 

20 The Foreign Assistance Framework is part of the Fiscal Year 2007-2012 Department of State and USAID 

Strategic Plan, 5/7/2007.
23 

Conclusion and Recommendations

Conclusion 

Federal regulations require less day-to-day government oversight and accountability for grants 

than for contracts. Nevertheless, both IRI and the Department of State have distinct 

responsibilities to ensure that grant funds are used in accordance with the terms of the grant and 

OMB regulations. Funds should be spent efficiently and effectively to meet grant objectives. In 

the case of this grant, these responsibilities were not always met. DoS did not always fully 

oversee grantee efforts and thus could not assure that the grantee was making progress in 

meeting grant goals and objectives. DoS oversight of grant charges and cost allocations were 

particularly weak. This occurred for a variety of reasons. An insufficient number of Grants 

Officers, insufficient knowledge on the different roles and responsibilities among the various 

DoS oversight offices, and less-than-comprehensive audit and financial reporting were major 

contributing factors. 

Similarly, the grantee could have done more to ensure the organization complied with OMB 

regulations by seeking approval for certain management and accounting decisions from the 

appropriate DoS officials before they were implemented. As a result of these lapses, significant 

potentially questionable cost charges and allocations were applied to this grant. Finally, it is 

incumbent on the grantee to clearly demonstrate how its activities are meeting the specific goals 

and objectives of the grant to foster democratic development in Iraq. Without such analyses, it is 

not possible to determine if the U.S. investment is having the desired impact. 

Recommendations 

To improve the management of grants for Iraq reconstruction, SIGIR recommends the U.S. 

Secretary of State direct offices as she determines appropriate to take the following actions: 

1. Assess the adequacy of the number of Grants Officers assigned to manage DRL grants to in 

Iraq. 

2. Require the Grants Officers to conduct in-depth assessments of the IRI cost charges 

accounting allocation methods highlighted in this report. The assessments should determine 

the level of questionable costs and whether funds should be recovered. 

3. Require the Grants Officers to instruct IRI to follow OMB guidelines on reasonableness, 

allocability, and allowability of costs and non-competitive contracts. 

4. Require the Grants Officers to instruct IRI to incorporate in its next A–133 audit a 

comprehensive audit of indirect costs and a compliance audit for at least one major DRL 

grant.

5. Require that Grants Officer Representatives are trained on OMB Circulars A–110, A–122, 

and A–133, as well as DoS grant policy directives to ensure they are fully aware of their 

responsibilities and limitations. 

6. Require the Grants Officer Representatives to enforce the grant requirements that IRI provide 

measurable indicators of their success in meeting grant goals and objectives. 
24 

Management Comments and Audit Response 

In written comments on a draft of this report, DRL incorporated input from AQM and generally 

agreed with the draft report recommendations. Specifically, DRL concurred with five of the six 

recommendations and identified specific actions it plans to take in addressing the 

recommendations. DRL stated that it did not concur with one of the recommendations, but its 

planned actions meet the intent of our recommendation. 

DRL’s comments are reprinted in their entirety in Appendix E. AQM also provided written 

technical comments, which we incorporated as appropriate. SIGIR believes that the actions 

identified by management, if properly implemented, are responsive to this report’s 

recommendations. 
25 

Appendix A—Scope and Methodology 

Scope and Methodology 

In February 2010, the Special Inspector General for Iraq Reconstruction (SIGIR) initiated 

Project 1007a to examine the United States Department of State Bureau of Democracy, Human 

Rights, and Labor’s (DRL) management and oversight of democracy-building grants to the 

International Republican Institute (IRI). SIGIR’s objectives are to examine for grant 209, the 

reasonableness, allocability, and allowability of IRI’s claimed security costs, and the extent to 

which the grantee documented its success in achieving governance, political participation, and 

civil society goals and objectives. 

We performed this audit under the authority of Public Law 108-106, as amended, which also 

incorporates the duties and responsibilities of inspectors general under the Inspector General Act 

of 1978. SIGIR conducted its work during February through June 2010 in Baghdad, Iraq and 

Washington, D.C. 

To determine the reasonableness, allocability, and allowability of IRI’s claimed security costs

charged against grant S-LMAQM-07-GR-209 (grant 209), we first obtained and assessed all 

grant documents, interviewed DRL, U.S. Agency for International Development, U.S. Embassy 

Baghdad, and IRI personnel in Washington and in Iraq. 

We then obtained and reviewed relevant criteria, including Office of Management and Budget 

(OMB) Circular A–110, OMB Circular A–122, and OMB Circular A–133. We obtained and 

reviewed budget and cost data submitted by IRI. We then selected a judgmental sample of 

invoices submitted by IRI security contractors from a schedule of security costs provided by the 

grantee. We reviewed the files of the contracts issued by the grantee to the security firms to 

determine the grantee’s compliance with federal regulations. We also examined applicable 

grantee policies and procedures. Additionally, we reviewed IRI’s internal controls over 

contractor performance as well as invoice processing. To ensure the existence of vehicles 

included in reported costs, we performed a physical inventory of the vehicles in Iraq. 

To determine the extent to which IRI assessed the impact of grant 209, we interviewed IRI and 

DRL personnel in both Iraq and Washington, D.C. and reviewed IRI’s quarterly progress reports. 

To confirm the grantee’s reporting of activities under grant 209, we judgmentally selected a 

sample of approximately 10% of IRI trainings conducted under the grant and reviewed

supporting documentation, including receipts, agendas, and sign-in sheets. In addition, we 

visited grantee headquarters in Erbil, Iraq, where we reviewed documentation, interviewed staff, 

and attended one training session under the grant. 

We conducted the audit in accordance with generally accepted government auditing standards. 

Those standards require that SIGIR plans and performs 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. 
26 

Use of Computer-processed Data 

We used computer-processed data in this report. The grantee provided security cost data in a 

report from their accounting system, managed using Deltek, a packaged accounting software. In 

our previous audit, the grantee stated that they have not modified the software. We reviewed 

source documents and gathered other evidence to confirm that the data was accurate. We did not 

review these systems but consider the data sufficiently reliable for the purposes of the audit 

objectives. 

Internal Controls

We reviewed DRL internal control procedures to oversee and manage these grants. In addition, 

SIGIR identified and assessed internal controls IRI used in managing grant costs and activities. 

The results of the review are presented in the report. We also reviewed selected financial 

management practices by IRI and in particular looked at compliance with certain aspects of 

OMB circulars, A-110, A-122, and A-133. 

Prior Coverage 

We reviewed the following reports by SIGIR and the Government Accountability Office:

Special Inspector General for Iraq Reconstruction 

Department of State Grant Management: Limited Oversight of Costs and Impact of 

International Republican Institute and National Democratic Institute Democracy Grants, SIGIR 

10-012, 1/26/10.

Government Accountability Office 

Opportunities To Enhance U.S. Democracy-Building Strategy for Iraq, SIGIR 09-001, 10/22/08. 

Grants Management: Enhancing Performance Accountability Provisions Could Lead to Better 

Results, GAO-06-1046, 9/06. 

Rebuilding Iraq: U.S. Assistance for January 2005 Elections, GAO-05-932R, 9/7/05. 
27 

Appendix B—Supporting Documentation Review 

Results 

Table 4—Grant 209 Supporting Documentation 

Training Description Objective

Noted in 

Quarterly 

Reports

Agenda 

in File

Sign-In 

Sheet in 

File Receipts

Legislation drafting in Turkey for Iraqi 

Research Directorate 1    

Marketing and public relations in Erbil 

for think-tank members 2   

Finance and reconciliation in Erbil for 

Anbar Youth coalition 3  

Training of trainers in Turkey for Civic 

Coalition for Minorities 3    

Monitoring and evaluation in Erbil for 

multiple groups 3    

International relationships in Erbil for 

North Youth Center 4  

Iraqi Women’s Capacity Building 

session in Basrah for Communist Party 

members 5  

Candidate and Provincial Council 

election in Erbil for Islamic Da’wa Party 

– Iraq Organization 5    

Election training in Erbil for National 

Reform Current 5    

Candidate and Provincial Council 

election training in Turkey 5    

Messaging and campaigning in Erbil for 

multiple Kurdish parties 5    

Candidate and Provincial Council 

election training in Erbil for multiple 

parties 5    

Polling interviewer training in Basrah for 

multiple parties 5    

Database training in Erbil for Islamic 

Supreme Council of Iraq 5    

Coalition Building in Erbil for multiple 

parties 5   

Campaign Management in Erbil for 

Service list 5    

Database training in Baghdad for 

multiple parties 5    
28 

Training Description Objective

Noted in 

Quarterly 

Reports

Agenda 

in File

Sign-In 

Sheet in 

File Receipts

Party building in Erbil for multiple 

Kurdish parties 5    

T4 campaign training module in Kirkuk 

for Iraqi Turkman front 5 a    

T4 campaign training module in Najaf 

for Iraqi Constitutional Party 5 a    

Media relations in Erbil for Change List 

party members 5    

T4 campaign training module in Erbil for 

Iraqi National Movement 5 a    

T4 campaign training module in 

Muthanna for Islamic Da’wa Party 5    

T4 campaign training module in Anbar 

for Iraqi National Movement 5 a    

T4 campaign training module in Erbil for 

Iraqi National Accord 5 a    

T4 campaign training module in Ninewa

for Supreme Iraqi Islamic Council 5 a    

T4 campaign training module in Salah al 

Din for Iraqi National Alliance 5 a   

Youth conference in Erbil for multiple

parties 5    

Total 23 24 28 28

Note: a 

Source: SIGIR analysis of IRI data, as of 4/14/2010.

T4 training is one of IRI’s election-related trainings. It emphasizes what the grantee calls the four “T’s” of successful campaigning: targeting, 

touching, tracking, and turnout of voters. 
29 

Appendix C—Acronyms

Acronym Description

DoS United States Department of State

DRL Bureau of Democracy, Human Rights, and Labor

GO Grants Officer

GOR Grants Officer Representative

IRI International Republican Institute

OMB Office of Management and Budget

SIGIR Special Inspector General for Iraq Reconstruction

USAID U.S. Agency for International Development
30 

Appendix D—Audit Team Members 

This report was prepared and the audit conducted under the direction of David R. Warren, 

Assistant Inspector General for Audits, Office of the Special Inspector General for Iraq 

Reconstruction. 

The staff members who conducted the audit and contributed to the report include: 

Bill Bedwell

Daniel Chen

Joan Hlinka 

Whitney Miller

Robert Whiteley 
31 

Appendix E—Department of State – Bureau of 

Democracy, Human Rights, and Labor Comments
32 
33 
34 

Appendix F—SIGIR Mission and Contact Information

SIGIR’s Mission Regarding the U.S. reconstruction plans, programs, and 

operations in Iraq, the Special Inspector General for 

Iraq Reconstruction provides independent and 

objective:

• oversight and review through comprehensive audits, 

inspections, and investigations 

• advice and recommendations on policies to promote 

economy, efficiency, and effectiveness

• deterrence of malfeasance through the prevention 

and detection of fraud, waste, and abuse 

• information and analysis to the Secretary of State, 

the Secretary of Defense, the Congress, and the 

American people through Quarterly Reports

Obtaining Copies of SIGIR Reports 

and Testimonies 

To obtain copies of SIGIR documents at no cost, go to 

SIGIR’s Web site (www.sigir.mil).

To Report Fraud, Waste, and Abuse in 

Iraq Relief and Reconstruction 

Programs

Help prevent fraud, waste, and abuse by reporting 

suspicious or illegal activities to the SIGIR Hotline:

• Web: www.sigir.mil/submit_fraud.html

• Phone: 703-602-4063 

• Toll Free: 866-301-2003 

Congressional Affairs Hillel Weinberg

Assistant Inspector General for Congressional 

Affairs

Mail: Office of the Special Inspector General

for Iraq Reconstruction 

400 Army Navy Drive

 Arlington, VA 22202-4704 

Phone 703-428-1059 

Email hillel.weinberg@sigir.mil

Public Affairs Deborah Horan

Director of Public Affairs

Mail: Office of the Special Inspector General for Iraq 

Reconstruction 

400 Army Navy Drive

 Arlington, VA 22202-4704 

Phone: 703-428-1217 

Fax: 703-428-0817 

Email: PublicAffairs@sigir.mil