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68–046 PDF 2011

USAID: FOLLOWING THE MONEY

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL SECURITY,

HOMELAND DEFENSE AND FOREIGN OPERATIONS

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

MAY 11, 2011

Serial No. 112–29

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON NATIONAL SECURITY, HOMELAND DEFENSE AND FOREIGN

OPERATIONS

JASON CHAFFETZ, Utah, Chairman

RAU ́ L R. LABRADOR, Idaho, Vice Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PAUL A. GOSAR, Arizona

BLAKE FARENTHOLD, Texas

JOHN F. TIERNEY, Massachusetts, Ranking

Minority Member

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

STEPHEN F. LYNCH, Massachusetts

MIKE QUIGLEY, Illinois

(III)

C O N T E N T S

Page

Hearing held on May 11, 2011 ............................................................................... 1

Statement of:

Shah, Rajiv, Administrator, U.S. Agency for International Development;

and Donald A. Gambatesa, Inspector General, U.S. Agency for International Development ................................................................................... 5

Gambatesa, Donald A. .............................................................................. 12

Shah, Rajiv ................................................................................................. 5

Letters, statements, etc., submitted for the record by:

Gambatesa, Donald A., Inspector General, U.S. Agency for International

Development, prepared statement of .......................................................... 14

Shah, Rajiv, Administrator, U.S. Agency for International Development,

prepared statement of ................................................................................... 8

(1)

USAID: FOLLOWING THE MONEY

WEDNESDAY, MAY 11, 2011

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON NATIONAL SECURITY, HOMELAND

DEFENSE AND FOREIGN OPERATIONS,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 3:25 p.m. in room

2157, Rayburn House Office Building, Hon. Jason Chaffetz (chairman of the subcommittee) presiding.

Present: Representatives Chaffetz, Labrador, Tierney, and Welch.

Also present: Representative Issa.

Staff present: Laura Rush, deputy chief clerk; Ali Ahmad, deputy

press secretary; Thomas A. Alexander, senior counsel; Molly Boyl,

parliamentarian; Kate Dunbar, staff assistant; Christopher Hixon,

deputy chief counsel, oversight; Jaron Bourke, minority director of

administration; Kevin Corbin, minority staff assistant; Jennifer

Hoffman, minority press secretary; Scott Lindsay and Carlos

Uriarte, minority counsels; and Zeita Merchant, minority LCDR,

fellow.

Mr. CHAFFETZ. The subcommittee will come to order.

Good morning and welcome.

I appreciate the patience of everybody involved here. Given the

timing of our votes, I know we are quite delayed here by almost

2 hours, so I appreciate your patience and the two gentlemen who

are going to address us today.

Today’s hearing is entitled, ‘‘USAID: Following the Money.’’ I

want to thank both parties for being here today. The purpose of the

hearing is to examine USAID’s efforts to measure, monitor and account for taxpayer dollars spent through U.S. foreign assistance

programs.

Over the past 10 years, the United States has dramatically increased economic and foreign military assistance. Since the year

2000, funding in these areas has risen sharply from approximately

$18 billion to over $45 billion. The United States provides foreign

assistance to 149 countries around the globe. Of this, USAID administers approximately $18 billion to over 80 countries.

In fiscal year 2010, the top three recipients of USAID funding

were Afghanistan, Pakistan and Haiti. Together, the United States

expended nearly $5 billion for flood relief, earthquake relief, infrastructure projects, political assistance and other reconstruction efforts.

Since USAID does not have internal capability, much of this

work is carried out by international organizations, for-profit conVerDate 17-JUN-2003 11:40 Sep 22, 2011 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68046.TXT KATIE PsN: KATIE
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tractors, and non-profit, non-governmental organizations, often referred to as NGO’s.

To administer and oversee these expenditures, USAID employs

nearly 10,000 full-time employees and contractors. Despite the

large number of personnel, USAID appears to have difficulty fulfilling its fiduciary responsibility to properly account for many of

these expenditures.

According to Inspector General Gambatesa’s written testimony

today, ‘‘Our work has frequently identified planning weaknesses

and potential improvements in documenting, monitoring, evaluating and reporting on program performance. For example, OIG audits have often identified inaccurate or unsupported results. In

fact, more than a third of the performance audits and reviews we

issued in fiscal year 2010 noted that data reported by USAID operating units or their partners were misstated, unsupported or not

validated.’’ This is a staggering observation. This analysis is consistent with some of the things that I have seen, quite frankly, in

both Afghanistan, Pakistan and Haiti.

A recent IG memorandum drafted to Administrator Shah reported that USAID implementing partners overstated numbers of

beneficiaries in Iraq. Let me high light a few of them: 262,482 individuals reportedly benefited from medical supplies that were purchased to treat only 100 victims of a specific attack; 22 individuals

attended a 5-day mental health course, yet 11⁄2 million were reported as beneficiaries; 123,000 were reported as benefiting from

water and well activities that did not produce potable water; and

280,000 were reported as benefiting from $14,246 spent to rehabilitate a morgue. In many ways, this is blatant fraud.

In each country, I requested basic information regarding ongoing

and completed projects from the local USAID offices. Among other

things, my request included number of projects, projected and actual costs, and whether USAID had verified the completion of the

projects. Officials in each country could not produce this most basic

information.

USAID has since provided some of the information I requested.

However, I am concerned that it took 8 weeks and a formal congressional inquiry to assemble the data. This is data that I believe

should be readily available to the American people. For those of

you here in the room, on the slides you will see some of the pictures that have been taken along the way.

Americans are paying top dollar for foreign assistance. Unfortunately, taxpayers are not getting top dollar results. In Haiti, buildings are in shambles. Mounds of trash cover the streets and electrical grids are substandard. More than a year after the earthquake, only 5 percent of the millions of cubic feet of rubble has

been removed. As of November 2010, only 22 percent of shelters

had been built. Having been there and seen it for myself, I wonder

if these numbers are generous.

The most heart wrenching reality, though, is that many residents

are still displaced, living among the filth and destruction. We are

talking about hundreds of thousands of people. For those of you in

this room looking at this picture, that is a classic sign that says

‘‘This rubble has been removed by USAID.’’ They placed the sign

in the rubble. That is what they are dealing with in Haiti.

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The bottom line is if the agency cannot accurately pinpoint its

progress at any given moment, then it is failing to adequately oversee its expenditures. Given USAID’s own challenges, I am increasingly concerned about the Direct Assist Program advocated by this

administration. Direct Assist provides money directly to foreign

governments such as Afghanistan which ranks, according to some,

179th out of 180 for the most corrupt countries in the world.

With recent examples of corruption such as the Kabul Bank, as

well as complete lack of oversight infrastructure, I would like to

know why the administration believes it to be a good idea to accelerate the direct payments to governments.

We simply cannot trust that a foreign government will provide

effective oversight of U.S. money. Necessary oversight tools are limited and accountability cannot be assured. If the Direct Assist Program is indeed part of the administration’s foreign policy toward

places like Afghanistan, then I urge it to stop immediately.

Part of the oversight discussion should also include an analysis

of whether the United States is benefiting from these investments.

It appears that in countries such as Pakistan, locals fail to realize

that we are even providing assistance. USAID’s ‘‘from the American people’’ message is not widely broadcast or, apparently, not

very well received.

I look forward to hearing from Administrator Shah on how we

can improve in this area. If recipients are not aware that the

American people are providing the assistance, then it is questionable whether the United States is getting proper credit for all of

its effort.

With the dramatic increase of U.S. foreign assistance, the Federal Government must ensure that it is conducting effective oversight each step of the way.

I look forward to hearing from our panel of witnesses about the

successes and challenges they face. This subcommittee is ready to

work with the departments in whatever way possible to prevent

the waste, fraud and abuse of taxpayer dollars.

I would like to now recognize the distinguished ranking member

from Massachusetts, Mr. Tierney.

Mr. TIERNEY. Thank you, Mr. Chairman.

Mr. Shah and Mr. Gambatesa, thank you for waiting so long, our

apologies on that. Both the chairman and I wish we were controlling the floor and it wouldn’t be that way.

I want to thank you, Mr. Chairman, for convening the hearing.

I want to thank Administrator Shah and Inspector General

Gambatesa for agreeing to testify here today.

USAID is a critical tool for U.S. foreign policy and international

security. In the past decade, we have tasked the agency with tremendous responsibilities for development, for humanitarian assistance and they have done that in some of the most hostile and challenging environments on earth, including Afghanistan, Pakistan,

Iraq, Haiti and others. The success of USAID’s mission in each of

these countries is significantly important.

Lieutenant General John Allen, the President’s nominee to be

the next Commander of the U.S. forces in Afghanistan, recently

spoke regarding the importance of USAID. His remarks are noteworthy. He stated that in many respects, USAID’s efforts can do

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as much over the long term to prevent conflict as the deterrent effect of a carrier strike group or a Marine expeditionary force.

There are adversaries in the CENTCOM region who understand

and respect American hard power, but they genuinely fear American soft power frequently wielded in the form of USAID projects.

While the hard power of the military can create trade, space, time

and a viable security environment, the soft power of USAID and

the development community can deliver strategic effects and outcomes for decades affecting generations.

While foreign assistance may have no natural constituency here

at home, it is helpful to hear the strong words of support from Secretary Gates, General Patraeus, and Lieutenant General Allen, for

continued congressional funding of USAID’s mission.

In today’s budget crunch, it is easy to pick on USAID as a soft

target for cuts. Those proposed cuts, I think, are short-sighted. Aid

is the key to building stronger sovereign governments that can support their own people in all those countries I just cited. While I

support fully funding USAID, I have also expressed vocal concerns

over the past decade as the agency has struggled to implement robust accountability mechanisms and find appropriate delivery vehicles for aid.

In particular, I have been concerned that USAID has become

overly reliant on international contractors as implementing partners, has lost too much internal capacity and has implemented programs without the necessary monitoring and evaluation mechanisms in place. The result has been not only disconcerting levels

of waste, fraud and abuse in many projects in Afghanistan, Pakistan and Iraq, but a lack of vision and focus within the agency.

USAID’s mission is so important, we simply cannot afford to

make these mistakes over and over again, so I am very encouraged

by Administrator Shah’s USAID Forward Program agenda. Critically, the agenda directly seeks to address the principal concerns

that I have raised for many years and that have been featured in

hearings before this subcommittee over and over again.

Namely, USAID is planning and procurement implementation reform that should lessen their reliance on large international contractors; USAID is planning to build more internal management

and policy capability; and USAID is planning to significantly

strengthen its monitoring and evaluation capacity. I look forward

to hearing from Administrator Shah today about his progress in

implementing this reform agenda and what Congress can do to

support it.

The USAID Inspector General also plays a critical role in providing additional oversight and accountability of USAID. I have

long advocated that the Inspector General put more personnel in

the field and contingency operations to monitor projects directly.

I have also advocated that the Inspector General do more to help

USAID build monitoring and evaluation mechanisms into the programs at the beginning of the projects instead of at the end. Toward that end, I was glad to see that USAID’s comprehensive preaward survey of Pakistani institutions to determine their capacity

to receive aid and work is implementing partners. I encourage

USAID to do more to address the weaknesses that have been identified in these surveys prior to direct funding assistance.

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Thank you again, Chairman Chaffetz, for convening this important hearing. I look forward to having the witnesses testify so we

can support their efforts in transparency and accountability.

Mr. CHAFFETZ. Thank you.

Do any other Members wish to make opening statements? Mr.

Welch.

Mr. WELCH. No.

Mr. CHAFFETZ. Members will have 7 days to submit opening

statements for the record.

We are now going to recognize the panel.

We are pleased to be joined by Dr. Shah who is the Administrator of the U.S. Agency for International Development and Mr.

Donald Gambatesa, who is the Inspector General for the U.S.

Agency for International Development. We appreciate the dedication that both of you have to this country, to the good practices of

this country. I know your heart is in the right place and we appreciate you being here today for a candid discussion about how we

can make the process better.

Pursuant to committee rule, all witnesses must be sworn before

they testify. Please rise and raise your right hands.

[Witnesses sworn.]

Mr. CHAFFETZ. Let the record reflect that the witnesses answered

in the affirmative.

We will now recognize Mr. Shah for 5 minutes for his opening

statement. I would remind you that additional comments will be inserted into the record. I will now recognize you for 5 minutes for

your verbal opening statement.

STATEMENT OF RAJIV SHAH, ADMINISTRATOR, U.S. AGENCY

FOR INTERNATIONAL DEVELOPMENT; AND DONALD A.

GAMBATESA, INSPECTOR GENERAL, U.S. AGENCY FOR

INTERNATIONAL DEVELOPMENT

STATEMENT OF RAJIV SHAH

Mr. SHAH. Thank you, Chairman Chaffetz, Ranking Member

Tierney, and members of the subcommittee.

I appreciate the chance to be with you today and appreciate the

chance to have a conversation about our efforts to create a more

efficient, accountable and transparent government. That goal is one

President Obama, Secretary Clinton and I have been working hard

to achieve and it is one I have made a top priority when assuming

the role of USAID Administrator just 17 months ago.

At its core, USAID is responsible for advancing opportunity and

empowering people throughout the developing world. It is a core

pillar of our country’s national security and foreign policy strategy.

We strengthen global food security, improve global health, lay the

groundwork for economic growth. In fact, some of our fastest growing trade partners are long time USAID recipients.

We expand democratic rights of disenfranchised citizens around

the world, especially in places like we are seeing throughout the

Arab world today and we provide crucial humanitarian assistance

in response to natural disasters and complex crises, with our teams

ready to deploy as they are currently deployed in and around Libya

and some of the most dangerous parts of the world.

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In over 100 countries, USAID staff carry out our mission by engaging local partners, implementing projects against clear multiyear strategies and evaluating our work so we can learn and improve our results.

Two months after joining the agency, I instituted one of the most

sweeping sets of reforms USAID has ever undergone, a package of

reforms we call USAID Forward. It is an early outcome of Secretary Clinton’s comprehensive Quadrennial Diplomacy and Development Review.

This ambitious set of reforms is changing the way we do business, with new partnerships and emphasis on transparency and accountability and a relentless focus on achieving results for our development dollars. Through these efforts we have rebuilt the agency’s budget and planning policy capabilities at no additional cost.

At the same time, we have established new oversight structures

and vetting systems to ensure our assistance is more transparent

and accountable than ever.

My goal is to help the American people see in a transparent way

how we spend our resources and what we get as a result. We have

started to make this possible by building the Web site,

foreignassistance.gov, a clear on-line dashboard that allows users

to easily track foreign affairs spending. Our Policy Bureau has created a series of new country development cooperation strategies so

we can work with our foreign partners and with our implementing

partners to set clear, defined goals sector by sector in programs

around the world. We will make those public as we are beginning

to do with our programs in an area we call Feed the Future, our

global hunger and food security program.

With congressional support, we are improving our business procurement and contracting practices, bringing modern practices to

improve and update reporting systems and focusing on working

with more local partners and through smaller, more manageable

contract mechanisms.

We have created a board on acquisition and assistance review

that has already reviewed large programs and broken them into

smaller pieces to improve management and competition and how

projects are awarded.

Finally, we have established a world class monitoring and evaluation system, one that gets us away from the traditional practice

of counting process results and having them reported by implementing partners who carry out the programs, as referenced previously, and one that uses independent, third party evaluations to

help us understand what we are getting for moneys we invest.

For example, in 7 of the 15 Presidential malaria initiative countries in which we have made investments to save children’s lives

from malaria, we recently found through independent evaluation,

that we have had a 36 percent reduction in all cause child mortality which means we are saving kids under the age of 5 from all

causes because of our malaria program and saving them by the

hundreds of thousands of kids a year.

Over time, these shifts and these improvements in our efforts

will help us do a better job of managing our programs in sub-Saharan Africa, Latin America and Asia and will particularly help us

working in specifically hard areas such as wartime situations in

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Iraq and Afghanistan. It is precisely in those settings where we

have focused a number of our newer and more aggressive reforms

to improve accountability and oversight, to expand the number of

times our teammates and colleagues are out visiting programs and

seeing how projects perform, and where we have rolled out initiatives like the Accountable Assistance for Afghanistan that is helping to improve oversight not just of contract partners, but of their

subcontractors and the results that we are seeking in the Afghanistan project.

Whether we are working in Afghanistan or Zambia, we do so for

one very clear reason, development is a core part of our foreign policy and national security around the world. We help by partnering

with our troops, in creating exit strategies and keeping them safe.

We work to prevent famine and food riots that are destabilizing

around the world and in saving millions of children’s lives every

year, we create the basis for stability and economic growth where

people believe it is often difficult to do.

That is why Secretary Gates has said doing development is a lot

cheaper than sending soldiers. Because it is so critical to our national security, we look forward to this conversation for me to learn

your ideas as to how we can do it better, more effectively and more

efficiently.

Thank you.

[The prepared statement of Mr. Shah follows:]

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Mr. CHAFFETZ. Thank you.

I now recognize Mr. Gambatesa for 5 minutes.

STATEMENT OF DONALD A. GAMBATESA

Mr. GAMBATESA. Good afternoon, Chairman Chaffetz, Ranking

Member Tierney and members of the subcommittee. Thank you for

the opportunity to appear before you to testify on behalf of the Office of the Inspector General for the U.S. Agency for International

Development. This afternoon, I will share information about our efforts to promote accountability in foreign assistance programs.

As you know, USAID has primary responsibility for managing

and supervising the implementation of its programs and activities.

Our role, as Inspector General, is to assist the agency in combating

waste, fraud and abuse and by promoting economy, efficiency and

effectiveness.

We take our role in, as you call it, following the money very seriously and draw on our highly skilled Foreign Service and Civil

Service direct hire employees as well as Foreign Service Nationals

to perform this function across our 11 offices in Washington and

around the globe.

Since foreign assistance priorities frequently shift, we continually

reevaluate our oversight posture and when appropriate, make adjustments to better position ourselves to address emerging risks

and challenges. For instance, in critical priority countries and disaster areas, we now have staff living and working in Afghanistan,

Haiti, Iraq and Pakistan. Previously, these countries had been

served by regional offices.

Our oversight covers the full portfolio of agency programs and extends to more than 100 countries. Our core oversight activities include both financial and performance audits and reviews to complement these efforts with investigations into allegations of criminal, civil and administrative violations.

In fiscal year 2010, we issued over 410 financial audit reports. These audits covered $8.9 billion in funds and questioned more

than $36 million in costs. Additionally, in 2010, USAID reported

that it sustained $213 million in previously identified questioned

costs.

Our performance related reports address program compliance,

implementation and results. When we identify areas that require

corrective action, we make recommendations for program improvement. Last fiscal year, we issued 66 performance audits and reviews with a total of 423 recommendations.

Additionally, we also have a significant investigative portfolio.

Our criminal investigators have full law enforcement authority and

investigate allegations of waste, fraud and abuse of U.S. foreign assistance funds and employee misconduct. Currently, we have about

200 open investigations.

In fiscal year 2010, our investigations yielded 12 convictions, 90

administrative actions—contract or employee terminations—and

$104 million in savings and recoveries mainly from criminal penalties, civil judgments and bills of collection. Our criminal investigators also deliver fraud awareness briefings to agency personnel,

contractors, grantees and host country representatives. Last year,

over 3,400 individuals attended our briefings worldwide.

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Agency managers have a positive track record in responding to

our recommendations and have developed appropriate plans to address every recommendation that we made last year. We are encouraged that today the agency and its leadership are taking steps

to further improve its accountability posture.

USAID has recently worked to improve its performance management by building more results orientation into planning processes

and strengthening its monitoring and evaluation programs. To promote sustainability of hard-won development gains, USAID is also

doing more to increase its use of host country systems and partners.

As you are aware, many accountability challenges the agency

faces are intensified in critical priority countries and disaster

areas. Monitoring the progress of these programs in such places as

Afghanistan, Haiti, Iraq and Pakistan is often hampered by security concerns, infrastructure related travel restrictions, frequent

staff rotations, widespread corruption, weak government institutions and diminished rule of law.

My office is taking a number of steps in response to the accountability challenges in these environments. We have expanded our

on-the-ground presence to provide greater audit and investigative

oversight, have increased outreach on fraud awareness and do

more to promote hotline reporting.

When a program requires enhanced financial scrutiny such as

cash transactions and disbursements, we conduct concurrent financial audits so that we can identify questionable expenditures and

control weaknesses as soon as possible.

On the investigative front, we leverage external resources by coordinating with other U.S. law enforcement authorities in task

force settings and working with local officials to investigate and

prosecute crimes. We also monitor implementing partners’ internal

compliance investigations and do more to hold them accountable for

reporting fraud.

Proper stewardship of American tax dollars requires a solid accountability framework. We are committed to working with agency

counterparts to ensure that such a framework is in place.

We appreciate your interest in our work and look forward to

learning more about your interest and priorities.

Thank you.

[The prepared statement of Mr. Gambatesa follows:]

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Mr. CHAFFETZ. Thank you. I appreciate that.

I am now going to recognize myself for 5 minutes.

The IG is reporting that ‘‘more than one-third of the performance

audits and reviews we issued in fiscal year 2010 noted that data

reported by USAID operating units or their parents were misstated, unsupported or not validated.’’ What is your reaction to

that, Mr. Shah? Is that accurate?

Mr. SHAH. I don’t believe so. Let me put it this way. The agency

and the entire U.S. system of providing foreign assistance and collecting thoughts on impact has been heavily skewed over the last

decade to a set of process indicators and reporting against those

process indicators the number of people who benefit. What does

that mean, people benefit—the number of visits that were made to

a particular farmer, what has that accomplished, has that improved yields, has that improved incomes?

In health, the number of insecticide-treated bed nets that are distributed in communities, we have very elaborate, very costly systems for collecting a huge amount of processed data and I believe

implementing partners naturally present optimistic data on what

comes in that way.

In reaction to that, I, with the Secretary’s strong support, really

restructured how we do evaluation in a pretty thorough way. We

now approach this by doing what we call impact evaluations. That

means when you design a program from the beginning, you understand what your counterfactual is, you collect baseline data and

you define what the result you are seeking to achieve is and measure against that.

I would highlight one example if we could put the slide of the

Pakistani farmers on the board. During the floods in Pakistan this

past year, that wiped out 60 percent of the productive agricultural

region and the flood plain around the Indus River. It was a tremendous, tremendous challenge. Pakistan could easily have missed its

winter wheat harvest. USAID, working with an organization called

the Food and Agricultural Organization, our U.N. partner.

Mr. CHAFFETZ. I am sorry, my time is so short. You have given

me 30 minutes of background on this.

Mr. SHAH. I just thought this would be a good example because

of instead of tracking things like the number of seeds that were

distributed, we did and evaluation and found that because of

USAID efforts, we actually saw 60 percent improvement in the

winter wheat harvest in that context. It was specifically targeting

those farmers who had lost their farms and productive livelihoods.

Mr. CHAFFETZ. I have no doubt that the good men and women

of the USAID are doing a lot of good, but when you have an Inspector who says more than one-third of what is being reported is inaccurate, to be kind, and at worse, it is outright fraud, as the oversight committee we are left wondering where is all this money

going to.

Having visited with you, not in a hearing, I know you share part

of this concern. Do you have anything specifically to refute what

the Inspector General is coming up with? Can you point to something and say he was wrong in this instance? Do you have any specific example where that one-third number is overstated in itself?

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Mr. SHAH. I do. I think the Inspector General would probably

suggest if we looked at impact evaluations and assessed the credibility of our impact evaluations as they stand against our evaluation policy that we put in place under my leadership, that would

not be an accurate statement, to say that a third of impact evaluations were fraudulent.

Mr. CHAFFETZ. Let us ask him. This is fiscal year 2010 which you

were involved with. Is your one-third number accurate or not?

Mr. GAMBATESA. The number is a roll up of various aspects of

what we do. When we say there is inadequate data, we are saying

either the data is not there or the implementing partner cannot

provide the data or the data is inaccurate. The one-third number

is a roll up of a number of different audits. We could go back and

figure this out.

Mr. CHAFFETZ. The concern is it is so overwhelming, it is so

huge. We have four specific examples I put out there that had the

appearance of outright fraud. We have to get to the bottom of

whether or not it is accurate and what are we doing. Mr.

Gambatesa, let me ask, when you find something that is unsubstantiated, when you find something you believe is fraudulent, you

talked about the convictions, how do you deal with that? Is that for

the Department of Justice? How does that work?

Mr. GAMBATESA. First of all, these weren’t necessarily fraud.

Mr. CHAFFETZ. Some were and some weren’t I understand.

Mr. GAMBATESA. That doesn’t mean they were all fraud. I don’t

want to overstate the issue there.

If we have allegations of fraud or develop potential fraud in programs, then we have our own investigators that go out and investigate this. If we have enough evidence or probable cause to go forward, then we will take it to the Department of Justice for prosecution. If we can’t get prosecution from the Department of Justice for

whatever reason, we will try local prosecution either with the local

Afghanis or the local Pakistanis.

Mr. CHAFFETZ. Thank you.

My time has expired. I will recognize Mr. Tierney for 5 minutes.

Mr. TIERNEY. Thank you.

Mr. Gambatesa, were those reports you were just discussing all

under Mr. Shah’s direction that they were cited or were they his

predecessor’s?

Mr. GAMBATESA. They were all issued in fiscal year 2010. Some

of them may have started before Mr. Shah took office, yes.

Mr. TIERNEY. Mr. Gambatesa, let me ask you about the Gardes

Coast Road Project in Afghanistan. Are you familiar with that?

Mr. GAMBATESA. Yes.

Mr. TIERNEY. So you are familiar with the New York Times report recently that the contractors on that project in eastern Afghanistan were making protection payments to the Akani affiliated

individuals for security?

Mr. GAMBATESA. That was the allegation, yes.

Mr. TIERNEY. Are you investigating those allegations?

Mr. GAMBATESA. Yes. Let me say this. We have looked into those

allegations. We are looking into other allegations. That specific allegation you addressed, we have looked into. However, we have not

29

been able to affirm that. We are not going to get a Taliban individual to testify about that sort of thing.

Mr. TIERNEY. Interestingly, we did. If you read the report that

had to do with the trucking contract, we did just that, so if we can

be helpful in any way or if you want to talk to our staff, we would

be happy to do that.

Administrator Shah, what kind of visibility do you have into the

operations of the security contracts?

Mr. SHAH. Let me offer three or four thoughts on that. First,

under this administration, we have more than tripled our physical

staff presence in Afghanistan in order to make sure we had enough

support on the ground to improve oversight and accountability.

Today, we have more people outside of Kabul, in the field, visiting

projects, than we did when I started, in all of Afghanistan.

Two, we have expanded our accountability efforts through a program we call Accountable Assistance for Afghanistan. That includes improved project monitoring and oversight, it improves an

effort to put in place 100 percent local cost auditing, it includes an

effort to expand partner vetting and it includes efforts to do program design in a manner that enables more access to information.

All of those things are helping us do a better job of being transparent and accountable in the assistance program there.

I do want to highlight that this is a war zone and the Gardes

Coast Road is a good example of a place where I believe 19 of the

workers on the road have died in the process of helping to construct it. There have been 364 security incidents.

The priority to do that project is part of a civilian-military integrated plan that this is part of our campaign plan.

Mr. TIERNEY. If I can interrupt you, that is all understood, as

were the trucking contracts, but the bottom line comes down to

when you start contracting and subcontracting, there is a real

question of visibility and a policy question, is this good policy. Everyone wants to be safe, but is this good policy that somebody is

paying off people and that money might be used detrimental to our

men and women.

I appreciate your answer on that, but what steps are you using

to reduce the reliance on contractors, what steps are you taking to

make sure you have visibility into the contractor and the subcontractors in those instances, and what steps are you taking to

improve the accountability in the performance of that and the

avoidance of fraud?

Mr. SHAH. That is a great question with respect to private security contractors. We have actually taken a number of steps in conjunction with the government in Afghanistan to provide more regulation and transparency of private security contractors’ behavior

and where resources go.

In many cases, we have broken down awards into smaller components so we have more reporting visibility on both primary contracts and subcontracts including private security contracts. We

have put a pretty aggressive vetting system in place together with

the intelligence and defense communities in Afghanistan in order

to make sure we are collecting all information possible on potential

actors that are risks and then taking action as we did in the situation where we have information that is actionable.

30

We have expanded our accountability efforts so that we do 100

percent local cost auditing so we can track as much of that money

as possible. All of these efforts have uncovered real cases and resulted in very specific actions that we have taken including the

Coast Gardes Road.

Mr. TIERNEY. The Inspector General made what I thought was

a very good recommendation about increasing the number of direct

hire personnel, particularly for those things inherently governmental in nature. How is your progress on that and what are your

plans in the future for that?

Mr. SHAH. If we could put up the process slide, I could share that

in more detail. There are a number of steps in our processes that

I believe are important that direct hire personnel conduct or do

that USAID staffs. Among them are program design, partner selection, some degree of monitoring. Often you can extend your capacity to monitor with third parties and with Foreign Service Nationals staff, but some participation and monitoring, then accountability and oversight.

We have actually done that very aggressively. We have been executing a program called The Development Leadership Initiative designed to increase the number of Foreign Service officers at

USAID. We have brought in about 650 new Foreign Service officers

between the last year of the Bush administration and the first 2

years of the Obama administration.

I think on a bipartisan basis, together with the military, there

has been recognition that we needed to reverse a 15-year, 37 percent attrition in the basic human resources of the agency. We are

well on our way to accomplishing that.

Mr. TIERNEY. Thank you.

Thank you, Mr. Chairman.

Mr. CHAFFETZ. I will recognize the gentleman from Idaho, Mr.

Labrador, for 5 minutes.

Mr. LABRADOR. Thank you, Mr. Chairman.

Thank you for being here, both of you.

I am a freshman Member of Congress, I am new to all these

things. I am new to learning about USAID and all the things that

you do. I can tell you I have never been more frustrated in my life

as when I was in Afghanistan and were asking a single question,

a simple question to the USAID workers: How many projects have

you started with the money we spent and how many projects have

you completed? We spent about 45 minutes asking that question

and we could not get an answer. The numbers were being thrown

out, it was 70, it was 50. They didn’t know how many projects they

had started.

We told them that we wanted that information. We wanted to

know how many projects had been started, how many projects had

been completed and we did receive quite an extensive response, but

we still didn’t get the final information we were asking for.

How do you actually know the project has been completed? We

know when the start date was, we know when the end date was

and we know how much money was spent.

One of things that I was most frustrated about was when we

asked what were your results, the answer was the result was we

spent X amount of money. That is all they knew, how much money

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had actually been spent. This was the beginning of this year, so

this was not something done under the prior administration. This

was something recent, the beginning of this year.

You say that you have gone through a different process. I think

you said before they were using a process result and now you are

using a different process, but at the beginning of this year, they

still did not know and they did not know how they could verify.

Can you explain that to me, Mr. Shah?

Mr. SHAH. Thank you for that point. I take very seriously your

point about results. I think at the end of the day we have to be

able to articulate what we are getting for the resources we have

spent.

In Afghanistan, since 2002, for example, there was a situation

where there were 900,000 boys in school, no girls. Today, there are

7 million kids in school, 35 percent are girls in large part because

of programs we have put in place. We can go into the next layer

of detail to identify how many teachers we have trained and what

the outcomes are related to that.

In health, we have seen a 22 percent drop in infant mortality as

a result of expanding a basic package of health services which used

to reach 9 percent of the population. Now it reaches 64 percent of

the population and it has been a longstanding USAID program

with the Ministry of Public Health that has delivered that result.

In energy, which is a difficult sector, we have gone from 6 percent of Afghans with access to electricity to more than 14 percent

today, including providing around the clock power in Kabul, and including providing enough technical assistance to the local electricity authority so that we have been able to double revenue collections on an annualized basis so they have a sustainability plan for

those efforts.

To me, it is very important that we can go sector by sector like

that and document how much we are spending and what we are

getting as results. We do have systems that allow for that.

Mr. LABRADOR. So why wasn’t that system in place 3 months ago

when we asked that simple question. It was not like we came in

the dead of night without any announcement that we were coming.

They knew we were coming.

Mr. SHAH. I don’t know why. That is the kind of data that we

collect on a regular basis.

Mr. LABRADOR. We don’t’ even have that information now. We

asked for those specific results. They told us how much money they

are spending, they told us when they started the project, they told

us when they ended the project, but we did not get to this point,

they knew you were going to be testifying here, we still don’t have

that information.

Mr. SHAH. I just shared some of that information. We can do that

sector by sector. I think what you are looking at is some version

of this spreadsheet which is how we basically track projects and

programs against strategic priorities. We do that mission by mission.

The reality is, when we get a request with a great deal of specificity, it may or may not be this data pulled that does it and we

have to construct something else, but I would just step back and

validate your point that I think it is important that sector by secVerDate 17-JUN-2003 11:40 Sep 22, 2011 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68046.TXT KATIE PsN: KATIE
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tor, we can describe a specific set of results or aspirational results.

We should be able to do that.

I am not sure who you specifically spoke to and in what context,

but our education team is the one that tells me this and we have

our leader for the program sitting right behind me. Who talks to

them on a weekly basis and we do regular reviews so we know we

are on track. A lot of times we are not on track and we make

changes and course corrections in that process.

Mr. LABRADOR. Thank you. My time is up.

Mr. CHAFFETZ. I recognize myself for another 5 minutes.

Do you have a list of schools in Afghanistan that we have helped

build, yes or no? You gave us some substantial numbers. When can

I get a copy of that list?

Mr. SHAH. An actual list, school by school?

Mr. CHAFFETZ. Yes.

Mr. SHAH. We could construct that. I don’t know that we have

that.

Mr. CHAFFETZ. So how do you come up with the metric if you

don’t even have the list?

Mr. SHAH. I don’t have it right in front of me.

Mr. CHAFFETZ. I know, but I am asking how long will it take for

you to produce that and give that to this committee? Ronald

Reagan once said, trust but verify. You throw out some spectacular

statistics. I want to see it, I want to actually see the schools. I want

to know where they are, because quite frankly, I don’t believe you,

because based on the statistics that I am hearing from the IG, a

third of what you have reported in the past is fraudulent. Can you

give me that list and when will I have it on my desk?

Mr. SHAH. We can get you the list and I will find out how long

it will take us and let you know.

Mr. CHAFFETZ. A month? Is that fair, 30 days?

Mr. SHAH. Yes, a month is probably fair, but let me come back

and verify that.

Mr. CHAFFETZ. Let me ask, Mr. Gambatesa, how do you react to

the metrics he talked about, particularly for Afghanistan?

Mr. GAMBATESA. We do our audits based on risk, so we don’t

audit every program or every dollar in every program. As I said

earlier, when we make a statement that a third, it is a third of the

things we have looked at.

Also, I wouldn’t say that every one was fraud. You used the

fraud and I would not say that every one is fraudulent. They could

be just mis-charged and the agency is getting the money back, so

I wouldn’t use the word fraud.

Mr. CHAFFETZ. Or unsubstantiated. What I worry about is we

have all these metrics thrown out, we have done this and we have

7 million people in school, but there is nothing to verify that. That

is what we are supposed to be doing.

Let me specifically address Haiti because that is one of the biggest human atrocities I have ever seen in my life. It is the saddest

thing I have ever seen.

The IG is saying that only 5 percent of the rubble, in an optimistic case, has actually been cleared. Do you dispute that number,

Mr. Shah?

33

Mr. SHAH. The latest numbers I have seen are between 10 and

20 percent. They are validated by the International Haitian Relief

Coordinating Committee, so I think that is the most updated

version.

Mr. CHAFFETZ. I was there, I couldn’t see any of it, if they are

clearing it.

Mr. SHAH. We can put up a slide on rubble removal.

Mr. CHAFFETZ. Go ahead. I would like you to show this slide because I have a point about this slide as well.

Mr. SHAH. OK. I would just make the point.

Mr. CHAFFETZ. Is this the slide you were hoping for?

Mr. SHAH. Yes.

Mr. CHAFFETZ. I want everyone to look closely at this slide. If I

cleaned the garage growing up, my mom would have kicked my

butt. That is not cleaned up, you scooted it over. Half that picture

is rubble that is still there.

Mr. SHAH. I have been to Haiti probably 10 times, including prior

to being in this job, prior to the earthquake and then many times

after the earthquake. There were 10 plus metric tons of rubble created because Haiti is fundamentally the poorest country in the

western hemisphere.

Mr. CHAFFETZ. I think the estimate was 20 to 30.

Mr. SHAH. That is not pushing it aside, sir, I think that really

is clearing roads and walkways. I will say the team we asked to

create the rubble removal plan for Haiti worked with a range of

international partners. It was the same team led by a gentleman

named Mike Burn who led the effort in New York City after the

World Trade Center.

Mr. CHAFFETZ. Let us keep going. Five percent results after 16

months is totally unacceptable. When I visited with the Ambassador, he said we weren’t going to participate in any more rubble

cleanup.

Based on the spreadsheet that we got there, which didn’t feel

very complete to me, there were six contractors that received over

$16 million. Three of those six contractors, based on the spreadsheet that was handed to me when I was in Haiti, said that the

work has been complete.

How can we justify 5 percent of the rubble being cleaned up, having spent tens of millions of dollars and three of our contractors

saying, yes, I am done, I did what I was supposed to do?

Mr. SHAH. Actually, the new numbers are 10 percent and in that

context, the actual amount of rubble that has been removed is

more than was removed 2 years after the Aceh tsunami situation.

When you look at it compared to situations like the World Trade

Center or Aceh in Indonesia, it is a standard result.

Mr. CHAFFETZ. What percentage of the rubble would you think

was actually cleaned up by us, by the United States?

Mr. SHAH. In general, we are about 10 percent of total commitments in the overall reconstruction. We have been about 25 percent

of the realized spending, so the commitments are what donors

pledged and the realized are what donors spent.

Mr. CHAFFETZ. How much money is that total? I know there is

money that comes from various agencies. How much money are we

putting into Haiti? How much has been spent?

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Mr. SHAH. In total, the supplemental is about $770 million and in addition to that is about $220 million a year in standard funding

through ESF.

Mr. CHAFFETZ. Plus we have outside donors, right, the Red Cross

and others?

Mr. SHAH. Outside donors, yes.

Mr. CHAFFETZ. You are close to a billion, plus the Red Cross,

plus what else, a bunch of celebrities from Sting to Bono to everybody?

Mr. SHAH. Yes, but celebrities don’t spend as much money. Other

countries have made big commitments.

Mr. CHAFFETZ. I read one report that they raised $50 million

plus in some telethon.

Mr. SHAH. Yes, presumably.

Mr. CHAFFETZ. There has been over a billion spent and you say

10, the IG says 5 percent of the rubble has been cleaned up.

Mr. SHAH. First of all, all this money is not for rubble removal.

In fact, we have worked very hard to try and get other donors and

other partners to participate in rubble removal because frankly, it

is a less sexy thing than some of the other potential investments.

I would say overall, it is important to recognize that Haiti is the

poorest country in this hemisphere. Before the earthquake, the

rates of access to clean drinking water or safe, modern sanitation

were very low. The number of children stunted in Haiti was over

50 percent. That means kids go to bed hungry, grow up with chronic deprivation, not getting enough protein.

Mr. CHAFFETZ. I have gone well beyond my time. I recognize

what a difficult situation this is.

One last very quick answer, how many USAID people work full

time on Haiti?

Mr. SHAH. Probably around 200.

Mr. CHAFFETZ. I will now recognize Mr. Tierney for 5 minutes.

Mr. TIERNEY. Tell us a bit about what is being done in Haiti with

the 200 people and the resources we are spending there and how

it is structured, who has the lead, what is the role of USAID in

comparison to the other organizations that might be involved?

Mr. SHAH. In terms of what has been done, we actually are very

proud of the fact that USAID was able to coordinate a major interagency, whole of government response to what was the largest natural disaster we have ever experienced. More than 230,000 people

lost their lives. In that context, we mounted the largest and most

effective humanitarian response ever. We fed more than 4 million

people during those first few months when there were real challenges in access to food and security.

We worked together with the international partners to help provide emergency shelter to 11⁄2 million people. We supported, together with others, more than 1 million people getting access to

specific vaccines. Today, more people have access to clean drinking

water in Haiti than they did before the earthquake because of some

data base decisions we made to make sure that as water was distributed, chlorine tablets and basic education was provided to help

people protect themselves.

Of the rubble, we think between 10 and 20 percent has been removed. In sectors like agriculture and health, we have pursued a

35

very strategic focus. In agriculture, for example, which is 60 percent of the total employment in Haiti, we focused on four very specific areas of production.

We have worked with private partners like Monsanto and others

to help get improved hybrid seed varieties to those farmers and we

have seen in many different instances, a doubling of actual crop

yields, measured and verified, that leads us to believe that the

Haiti agricultural sector can become a more vibrant sector going

into the future.

We also helped establish an industrial park in the north that will

create 5,000 jobs next year on the way to creating 20,000 jobs by

attracting a Korean company and others for manufacturing. We

have worked with partners like Coca-Cola to help create a juice industry, in that case with mango juice in particular, so that the core

productive assets of the country are contributing to the economy

and employment.

You can’t judge the effort in Haiti in 1 or 2 years. It will be a

longer term effort. Haiti has been a very poor country for a long

time. We have been very focused on taking the time to do deliberate planning and coordination in order to make sure this time

around the results are much, much better.

Mr. TIERNEY. Is USAID the lead in this overall project?

Mr. SHAH. USAID works in coordination with the Department of

State and other agencies.

Mr. TIERNEY. Who, what country, person, entity is in charge of

the bottom line on whatever might be the overall strategy of where

we are going to try to let this country take itself?

Mr. SHAH. We have a special coordinator at the State Department, Tom Adams and Cheryl Mills.

Mr. TIERNEY. The United States has taken on the responsibility

of heading this whole thing?

Mr. SHAH. No, I shouldn’t say that. The government of Haiti is

responsible for their reconstruction. There is an Interim Haiti Reconstruction Commission that has been created that is co-chaired

by the Prime Minister of Haiti and by former President Clinton,

that has been incredibly helpful in bringing all the donors together

under the government of Haiti’s plan.

Mr. TIERNEY. What kind of technical expertise does this group

have in terms of people that can work with these donors, can plan

where the future of this country is going in terms of employment,

sustainability and things of that nature?

Mr. SHAH. It has some specific technical expertise and it draws

on resources inside the government, at USAID and other partners

to do exactly those tasks.

I will note that during the earthquake, 28 of 29 ministries collapsed, 15 percent of the senior level work force.

Mr. TIERNEY. I am trying to get a figure on that. After this, obviously everyone was trying to survive, get people going and keep

them alive and make ends meet. Are we at the stage now where

we think we have stabilized a little bit and somebody is saying,

here is the grand plan going forward or are we not there yet, are

we still putting tourniquets on bleeding problems?

36

Mr. SHAH. At this point, we are in the phase of reconstruction.

It will be a long and challenging process, but we is one where we

really do have to focus on trying to build better.

Mr. TIERNEY. The design is an overarching design of what we are

constructing toward?

Mr. SHAH. Absolutely. The Haitian government strategy is about

decentralized economic development in specific targeted regions to

restart the agricultural economy and to promote industrialization

and jobs, and to do it in a way that helps people have economic opportunities outside of Port-au-Prince so it takes more demographic

pressure off of Port-au-Prince. That type of strategy is one we support fully and our programs are aligned against that strategy and

our programs are limited to those areas where we might be the

lead donor or partner creating space for other partners to lead in

other sectors, other international donors and partners.

As I mentioned before, overall, we are about 10 percent of the

total commitments to Haiti and about 25 percent of current realized expenditures in terms of donor participation.

Mr. TIERNEY. Thank you.

Mr. CHAFFETZ. I now recognize the gentleman from Idaho, Mr.

Labrador for 5 minutes.

Mr. LABRADOR. Mr. Shah, according to a recent memorandum

from Mr. Gambatesa, he stated that monitoring the progress of

USAID programs in Afghanistan and Pakistan has become more

and more difficult as funding is directed to the areas that are most

insecure. In Pakistan, for example, much of USAID’s assistance is

directed to the federally administered tribal areas where USAID

employees cannot travel.

Audit work in Afghanistan and Pakistan, the Office of the Inspector General has reported that security conditions have either

hindered program accomplishment or has the potential to create

implementation problems. We actually made that same observation

when we were there. We were told by USAID workers there that

we had a lot of difficulty going into those areas. To conduct many

of its audits, the IG’s office will employ locally owned contractors

to conduct oversight.

The question to you is, do you agree with those assessments and

what specifically are you doing to fix this problem?

Mr. SHAH. When I started, I certainly felt that we needed to get

out and see our projects in a more effective manner. There are two

or three strategies we have deployed in Pakistan to accomplish

that task.

The first is we worked on security to make sure we have security

as we go, but taking risks in getting out there. In fact, even in

Fatah and neighboring areas, we have had more than 160 staff visits to the sites and projects over the last 6 months.

Second, we have built some mechanisms that use third party

monitoring and evaluation personnel, mostly local but often very

highly qualified engineers that can look at road projects and conduct a specific assessment or educational specialists that can go

into a school and make a careful assessment of what is taking

place. We are increasingly getting more data and information from

those types of partners out there doing that.

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Third, as I mentioned previously, is to make sure in project design, we are collecting baseline data against certain types of

counter factual situations so we can say in a statistically validated

and verified way that kids are learning more because of the following programs.

In Fatah and in some of the contested areas, we use a mechanism called the Office of Transition initiatives that has been able

to get out and support quite a lot of activity from building roads

to improving schools. They actually are able to produce GIS maps

that will document where their projects and programs are in the

community. That has also been a very helpful strategy to accomplish that task.

Mr. LABRADOR. Do you visit the actual projects in those areas?

Mr. SHAH. Yes, our staff would visit those projects and our Pakistani third party partners would also visit when they might have

more time to conduct careful assessments.

Mr. LABRADOR. How do you verify completion of the projects?

Mr. SHAH. We do visits, we rely on reporting from implementing

partners, we rely on the third party evaluation mechanisms to

make those assessments as well.

Mr. LABRADOR. Mr. Gambatesa, do you agree with the statement

just made by Mr. Shah? Could you please address to what extend

has inadequate contractor oversight or activities resulted in money

lost to the American people?

Mr. GAMBATESA. We have the same problem, obviously, in getting out to Fatah and some of the regions to the north. We haven’t

been able to get out into some areas like Punjab and places south.

Obviously, the agency has the same issue. We also use, as you

mentioned in your remarks, third parties, other audit firms that we

will hire, local audit firms, to go out and help us with our review

and doing our audit work. The Agency is doing the same thing basically, so I agree that they are doing that.

Mr. LABRADOR. To what extent has the inadequate contract oversight or activities management resulted in money lost to the American taxpayers?

Mr. GAMBATESA. It is difficult to quantify that but obviously

without proper oversight, it is difficult to determine that, both our

inability to get out there and sometimes the agency’s inability to

get out there and verify. To put a dollar value on it, I am not sure

I could do that. I imagine we could probably come up with something like that.

As I said earlier, when we go out and do audit reviews, we are

not looking at every program or every dollar of every program. We

are taking a slice of it and actually looking at it at a point in time.

It is sort of a snapshot in time from when the program began to

when it ended. If it is a 5-year program, it would not be very

worthwhile for us to look at it during the first year. We have to

give it time to mature and we look at it at a point in time.

Talking about the rubble earlier, we looked at it at a point in

time where the rubble in Haiti was only 5 percent. Now, the Administrator says that has improved. I cannot confirm or deny that

because we haven’t gone back and looked at it again. I am certain

if that is what he is saying, that is true. To put an actual dollar

value on that, I can’t do that. I don’t think we can.

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Mr. LABRADOR. Thank you.

Mr. SHAH. Can I add a thought? When I joined the comment

about the morgue, I read that and Don and I had a conversation

about it. I actually read it out loud to my senior staff and said, this

is exactly why we are launching USAID Forward because we are

not going to rely on these sort of processed indicators that were reported by the very partners that do the implementation.

When I say that in Pakistan we have reached 620,000 farmers

through the flood relief efforts, or that we have built 280 schools

through our stabilization program in Fatah and those areas, that

is information that is coming to us now from third party monitors.

It would be ideal to always have U.S. direct hires able to be out

there assessing all of these specific things, but that is not always

possible and are pursuing this work because it is a core part of an

integrated national security strategy. We need to do it to help keep

our country safe and to help in some dangerous parts of the world

provide opportunities to people to have an alternative to a path

that is threatening to us.

I just want to say that because I think that is an important shift

in how we think about monitoring evaluation and results reporting

that is highly relevant to our reform agenda.

Mr. CHAFFETZ. Thank you. I now recognize myself again for 5

minutes.

I want to go back to Haiti and talk specifically about shelters

and the lack of progress there. I am referring to the Office of Inspector General audit of USAID’s efforts to provide shelter in Haiti,

an audit report issued April 19th of this year.

Mr. Gambatesa, that report says as of January 6, 2011, grantees

had repaired 1,875 houses but their goal was 14,375. Can you help

me understand what the lack of progress is due to?

Mr. GAMBATESA. Our audit report made several findings and recommendations to solve the findings. It seemed some of the problem

had to do with variations in cost, quality standards were different.

Also, there was an issue with customs and 8 out of 11 grantees experienced delays clearing customs from 6 weeks up to 5 months. So

they couldn’t get the parts in.

Mr. CHAFFETZ. Let us put it in perspective. There are home repairs but there are also the shelters. The shelters that I saw, and

this is where I am asking for clarification, roughly 12 feet x 12 feet.

These are not some big, massive apartment complexes, this is a

very, very basic slab of cement, four walls and a tin roof. Those are

the same shelters I was looking at that you are talking about here.

The report says USAID, OFDA has the projected shortfall of 65

percent in meeting its goal.

Mr. Shah, these numbers are so off base. They are so short of

the nearly a million people there living amongst waste, feces, I saw

rats running around the school. We are so short of the goals, how

do we answer that to the American people who have poured their

hearts and about a billion dollars into such lack of progress?

Mr. SHAH. Two things I think are noteworthy about that. First,

the initial strategy was to build as much temporary shelter as possible. I think that is what you are referring to.

Mr. CHAFFETZ. How many temporary shelters have we built?

39

Mr. SHAH. We have currently built 20,000 on the way to getting

to 33,000 but the initial strategy was to build many more which

I acknowledge. As we were in the process of doing what they call

assessments of just over 400,000 structures that were home structures, they found a certain percentage were red homes that needed

to be demolished.

Mr. CHAFFETZ. Can I go back for a second? The audit report says

by June 30, 2010, grantees had completed only 1,883 shelters. That

number is a bit old. You are now saying that number is over

20,000?

Mr. SHAH. It is 20,000, yes.

Mr. CHAFFETZ. Is that your finding of the number of shelters

that have been completed, 20,000?

Mr. GAMBATESA. Again, we haven’t gone back and looked at it.

Mr. SHAH. It has been a year pretty much.

Mr. CHAFFETZ. It says as of November 15th, grantees had built

only 7,179 transition shelters, 22 percent of USAID’s target.

Mr. SHAH. Right, so you can see the rate.

Mr. CHAFFETZ. What is the difference between a transition shelter?

Mr. SHAH. I think this conversation so far has all been about

transitional shelters. They are structures with plywood supports

that start with tarp and over time you can put corrugated tin and

other materials to make it a longer term shelter but they start as

transitional shelters.

Mr. CHAFFETZ. Part of my frustration was part of what I saw

was a bunch of tarps. They said USAID on them, but these are not

some Coleman tent that you would buy, these are literally a tarp

on four pieces of plywood.

Mr. SHAH. Right. They are transitional shelters. The tarp actually meets a certain set of what we call sphere standards that can

withstand wind and rain and other things.

Mr. CHAFFETZ. The more permanent shelters, which I understand having read the material, are intended to only last 3 years,

how many of those have been completed?

Mr. SHAH. The transitional shelters can last 3 years as they are

built up with tin and other building materials.

Mr. CHAFFETZ. My question is, how many of the more semi-permanent structures have been built because there are shelters and

then there are temporary shelters? How many of the shelters have

been built? The IG put them in two different categories.

Mr. SHAH. The two categories I would use, and I don’t want to

answer in the wrong way, are temporary shelters that are tarp and

plywood-based structures that can be improved over time that can

last for 1, 2 to 3 years. The primary strategy of repairing the yellow and green homes so they can be permanent structures for families or building homes, they could be permanent structures for families. We have those three primary strategies.

This particular IG report refers to the Office of Foreign Disaster

Assistance that was doing just the temporary shelters. In a strategic shift we made sometime last year based on the data that

there were many more homes that could be fixed that people could

go back to than we initially thought was to say we would do fewer

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temporary shelters and more yellow house repairs and green house

returns because that was more cost efficient.

Mr. CHAFFETZ. That is the number I am citing in this report. The

commitment from USAID was 14,375 houses but it only completed

1,800. Is there an updated number?

Mr. SHAH. I don’t have it at my fingertips, but we can get it to

you.

Mr. CHAFFETZ. That would be most appreciated because we are

talking about a magnitude of a million people, are we not?

Mr. SHAH. We have come down from having 11⁄2 million people

in tarps, tents and temporary shelters to now 680,000. I would note

there are two important factors to think about. One of the roadblocks on rubble removal has been the inability to get enough staging sites from the government of Haiti, so we continue to work with

the government. I think we are optimistic that they will manage

to find sites that would allow the international community and the

Haitians to accelerate the rubble removal and create the space for

the new housing.

Mr. CHAFFETZ. My time has more than expired.

I now recognize the chairman of the full committee, Mr. Issa, of

California.

Mr. ISSA. Thank you, Mr. Chairman.

I will followup on that. I have been following USAID for 11 years

from when I was on the Foreign Affairs Committee. If you don’t

have the cooperation of the host country, why is it you don’t come

back to the committee with jurisdiction and say, we are being impeded from meeting our goals because you are talking about abysmally failing.

If this were New Orleans, you would be fired. FEMA got fired for

doing a better job than you are doing in Haiti, didn’t they, as far

as accomplishment? I am not talking about your effort.

Mr. SHAH. I would just note that in Haiti, we are somewhere between 10 and 25 percent of the effort and I don’t think we want

to assume, as we might if we were in a domestic situation, assume

total responsibility.

Mr. ISSA. Let us go another way. Haiti is the poorest country in the western hemisphere, $1,000 in Haiti is a whole year’s money;

a billion dollars for a million people is $1,000 a person. Am I off

by a factor of 10 or am I right, a thousand thousands is a million

and a million thousands is a billion.

You spent $1,000 per capita if you looked at a million people, and

I realize I am using loose numbers and so on, but you spent a

whole year’s salary per person and you tell me you haven’t been

able to clear away most of the rubble away. I want to know is when

you do not have the cooperation of the host country to a sufficient

level, even if we are 10 percent, the other 90 percent have the same

concern.

Why is it you don’t come back to the Congress and obviously to

the State Department that you work with and say, we are unable

to meet our mission, we are wasting money, we are having people,

680,000 by your own number, still suffering more than a year out

without homes?

Mr. SHAH. First, I would just say, on the money, of the billion

dollars that has been spent, about $700 million was spent in the

41

first 3 or 4 months as part of the response. Certainly, giving each

person a certain amount of cash in that context would not have

met the needs we were able to meet, food distribution to 4 million

people, thousands of surgeries that saved hundreds of lives.

Mr. ISSA. We are talking about a billion dollars is our 10 percent?

Mr. SHAH. Right. That money hasn’t been spent yet. Some of it

has been obligated, but that billion dollars has not been spent.

Mr. ISSA. Let me switch gears for a moment to the IG. This is

the closest we could be to a disaster outside our United States, virtually. Haiti is about as close as anywhere you are going to get except maybe Canada or Tijuana. If we can’t do better in Haiti, what

does that say about our ability to have a poor country that needs

10 or 20 million people taken care of, whether it is us by ourselves

or the world? Are we organized for success on this scale, based on

what you have seen in Haiti? You can just say no and I would be

happy.

Mr. GAMBATESA. It is difficult to answer that question.

Mr. ISSA. Let me ask it another way. I was in the Army, I put

up temporary shelters. Whether they are canvas or they have some

plywood, I have certainly seen them in Afghanistan and Iraq, our

soldiers are often living in something similar.

In your estimation, we go in and if we want to put a million people in those types of temporary shelters, isn’t this a goal that

America should be able to meet in a matter of, if not weeks, a couple of months when you look at the sub-components and the fact

that the human beings you are trying to help are the work force

to put them up? It doesn’t take special machinery, it doesn’t take

bulldozers, it doesn’t take heavy lift. All it takes is the delivery of

the materials and once the port was operational, could have been

delivered enough for everyone. Isn’t that true?

Mr. GAMBATESA. I would think so, in a perfect world.

Mr. ISSA. Haiti is not a perfect world, we get that, but once the

port was opened and our President committed to provide real relief,

what went wrong that we are here talking about various numbers,

but ultimately we are debating about how big a failure to bring relief in appropriate numbers to Haiti? Did you lack money? Did you

lack resources that America could have supplied? Did you lack the

willingness of the government to cooperate? Was there great waste?

Was there an absence of people willing to put up their own shelters? I certainly think the last one we can assume, there were plenty of people willing to put up their own shelters.

Mr. SHAH. I would step back and suggest that characterizing the

large scale humanitarian resource as a failure would be something

I would take great issue with.

Mr. ISSA. Wait a second. I appreciate that, I wasn’t talking about

that, although to be honest, media did a very good job of telling the

world that it wasn’t so good, but that was a televised event where

the cameras were on. Today’s hearing is really about the inability

to accomplish, with the moneys given, what the goal was in a timely fashion after the camera lights went off. If you would limit your

answer to that, I would appreciate it.

Mr. SHAH. Right now we are pursuing a comprehensive reconstruction strategy with the government of Haiti. We are primarily

42

taking the lead in a few specific sectors, agriculture, health and energy.

Mr. ISSA. With the indulgence of the Chair who is temporarily

out, because I am not getting the answer. There you are, you

leaned forward. With the indulgence of the Chair who is here, but

leaning back in his chair, you have mission creep right here. I

think what I have seen in the reports, in the IG’s reporting, and

you agree to in a way, is you didn’t accomplish the originally stated

mission, you have gone from soft housing to working on hard housing, but you are not dealing with 11⁄2 million in totality because before you ever got everyone into soft housing, you have made shifts

through the process, so you are always working on a next program

that is different than the one you didn’t accomplish. Would that be

even a little bit fair?

Mr. SHAH. No, I don’t think so, not with respect to housing. It

was never our goal, as Americans, to directly build temporary shelters for the 11⁄2 million displaced Haitians. A big part of the strategy was to enable as many returns as possible to rural communities, to other cities and to de-intensify Port-au-Prince. We supported that effort and had 400,000 to 500,000 people leaving Portau-Prince into host country arrangements. We provided a lot of

support for that and logistics for that which was very important,

but that was a government decision that we supported.

Mr. ISSA. Because my time has expired and they have been very

indulgent, let me ask for a yes or no. Are you satisfied with the

work you have done as a model for the effort of USAID in the western hemisphere?

Mr. SHAH. Sir, I am never satisfied with anything. I always think

in this business and this industry of saving lives and helping people who are vulnerable.

Mr. ISSA. Give yourself an A through F score, please.

Mr. SHAH. I would say the initial humanitarian response was

tremendous.

Mr. ISSA. You give yourself an A for the original response. What

about today?

Mr. SHAH. I don’t know that I would ever use an A for anything

but I would say that was a tremendous initial response. I think we

would generally have had more success with more rapid rubble removal and housing type issues if we had a confluence of factors including more specific support from our partners and the government of Haiti to identify land for staging sites and to support some

of the issues that were faced at the port and with respect to customs. In general, we respect the fact that we are not in charge of

Haiti, we operate in a bilateral partnership with the elected Government of Hati and we respect that and work within that framework.

Mr. ISSA. Thank you. Mr. Chairman, thank you for your indulgence.

Mr. CHAFFETZ. Thank you.

I would now recognize the gentleman from Massachusetts, Mr.

Tierney.

Mr. TIERNEY. Thank you.

I think we are all trying to get at the same thing here in different ways and it is a bit why I asked the question earlier about

43

whether or not there is an overarching plan of what everybody

hopes to accomplish long term, and if that plan would then identify

which country or entity is responsible for what aspects of it and

then an idea of how much money each entity or aspect of a country

would be expected to expend to accomplish that end, and how do

we measure where we are going against it.

Is there a set of documents you could present to the committee

that would show us that?

Mr. SHAH. Yes.

Mr. TIERNEY. OK. If you would do that, I would appreciate that

and we would put that on the record, Mr. Chairman.

The other thing is I know you say the initial response was tremendous. It was an incredible burden on everyone and the response on that. There was a period of time after that when there

was some difficulty determining who in the Haitian government

was going to respond to give direction, is that correct?

Mr. SHAH. President Preval ultimately is and was accountable

for those decisions and we have been in constant direct communication with him and with his Prime Minister.

Mr. TIERNEY. I think you mentioned there were 29 ministries

that were in pretty sad shape after the earthquake?

Mr. SHAH. Twenty-eight out of 29 ministries had collapsed.

Mr. TIERNEY. I would assume that gave some level of difficulty

in getting organized and getting direction for a number of things?

Mr. SHAH. That is correct.

Mr. TIERNEY. I think that, in and of itself, would probably cause

some waste or misspent money at some point in time, not for intention to be wasteful, but for circumstances.

Mr. SHAH. That is also why we helped set up the interim Haiti

Recovery Commission which is co-chaired by the Haitian Prime

Minister and President Clinton. It includes as board members a

number of major donors and multilateral partners. That was a

mechanism that helped bring together people at precisely a time

when the Haitian government was clearly recovering from a tragedy that we can only begin to imagine.

Mr. TIERNEY. If I can step back from Haiti and look at the broader picture of what USAID is doing, you have talked about some of

the aggressive reform agenda items that you want to implement.

A lot of them address some of the concerns this committee and I

have had personally on accountability, on transparency, on trying

to bring in-house those inherent governmental functions, bringing

in people trained and if we have to have contractors, people who

at least can manage the contractors and monitor them and hold

them accountable. It seems to me you are progressing in that area.

If the budget were cut to the extent that has been proposed for the 2012 budget to $37 billion and within 4 years after that, down

to $29 billion, is that something that is workable to continue that

reform agenda and get that accomplished while your budget is

shrinking? How do you assure people, if not, I assume you are

going to say not since you put in the budget, how do you assure

us that money is well spent and not running into some of the difficulties we have heard here today?

Mr. SHAH. No, sir, if we were to face the almost 30 percent across

the board cut, we would not be able to continue any of our reform

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effort. In fact, the most important, in my mind, is our procurement

and contracting reforms that is very consistent with your writings

and public speeches about this subject.

We are relying very much on our ability to invest in expanding

our procurement work force, to hire 70 specific civil servants who

have the expertise to help us shift from cost reimbursement to

fixed price contracting and to use more milestone-based performance award mechanisms, which we have built and are now propagating out, but it takes unique expertise to put that in place and

to make that work.

We are on a path. It is important to maintain that path in order

to be able to achieve the vision we are talking about.

Mr. TIERNEY. Mr. Chairman, I am not going to ask anymore

questions. I would like to look at the material that Mr. Shah is

going to provide. We have a history of over a decade now, probably

two decades of hollowing out USAID and eviscerating the personnel

who had the experience, the training and the capacity to not only

get US aid out to countries and have them work well, but also to

monitor the money, do the accounting and make us feel more comfortable.

On the one hand, we have hollowed it, on the other hand, we are

complaining that we are not getting the accountability and transparency that we want. It seems to me if we continue down the path

of hollowing it out and not providing the resources, we are just creating the situation we say we want to solve.

On the other hand, Mr. Shah, I do think there is a responsibility

to show this committee in real time that improvements are being

made and a lot of these concerns are being addressed, and that

there are substantial savings on that basis moving forward. I don’t

think the patience level is going to last forever, notwithstanding

how important some of us think development and aid is in terms

of our national security picture.

Thank you. I yield back.

Mr. CHAFFETZ. Thank you.

In closing, Mr. Gambatesa, I just want to give you a last opportunity. Is there something else you wanted to share with the committee that you planned to share but didn’t have an opportunity to

address?

Mr. GAMBATESA. No. The only thing I would like to say is that

most of our audit work comes up and inherently it points to negative. We do accentuate the positive when it is there, but primarily

we are looking at ways to improve programs, so for improving programs, we are saying it isn’t working properly.

I have to admit that many of the issues Mr. Tierney mentioned,

the issue of staffing, many of our audit reports have indicated that

the staffing is a significant issue at USAID. The issue of procurement reform, I am very heartened by Dr. Shah’s movement toward

fixing some of these problems and I hope they will work. I think

they will with his leadership. I believe he is pushing the agency in

the right direction and I think with the proper support and proper

budget support, many of these issues we have identified in the past

can be fixed.

Mr. CHAFFETZ. I appreciate that. To the men and women who

work specifically with you, I know they are small in number and

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you go into some of the most difficult situations on the face of the

planet. We appreciate their efforts and I want them to recognize

the value Congress places upon their work. I know it is hard for

them to be away from their families and whatnot.

The same would be said for the people around the world serving

in USAID, a lot of good people with the right heart, dedicating

their time and talents, away from their families, difficult security

situations, difficult living arrangements. I don’t want to detract

from their good efforts.

It is the responsibility of the Congress to hold people accountable

and to provide that data and information. To that end, I do think

the agency is failing to provide data to this body in a timely fashion. Members of Congress spend a great deal of time flying, at

great taxpayer expense, to visit these situations around the world.

Uniformly, we have the most difficult time getting the most basic

information.

I just want to have your ongoing commitment that we are going

to be able to access that real time data, what has been accomplished, what are we spending and then be able to see what is actually being spent. I think the American taxpayer should know

where their billions of dollars are being spent.

Mr. SHAH. You certainly have my commitment. I would invite

you personally and other members of the committee to come potentially with me on some of these trips. I appreciate your deep interest in the reform effort we are taking. I think we are implementing

the most aggressive reform across any Federal agency. I think it

is very important and I welcome you ideas and thoughts on how

to make it better.

To the extent that you are continually interested in this, I would

also like the opportunity to demonstrate some of our programs like

Feed the Future which is working in 20 countries targeting moving

18 million people, including 7 million kids, out of the state of poverty and hunger which really does bring together so many of the

best practices of what we have learned about development in terms

of private sector engagement, accountability and conditionality and

putting in place the kind of measurement systems that let us know

in a very, verified way, that we are saving lives and improving livelihoods around the world.

Mr. CHAFFETZ. I appreciate that. I think I speak for Members on

both sides of the aisle in saying we want you to be successful. We

have human lives depending on it. We allocate a lot of resources

in order to do this.

With that said, I need to say one more time because there have

been good relief efforts, probably the immediacy of what happened

in Haiti, but having seen it myself, having read this report, having

gone through it, my own personal assessment, 16 months after that

devastating earthquake in Haiti, I think the totality of the U.S. response has been pathetic and disappointing, despite a lot of money

moving in that direction and undoubtedly a number of lives that

have been saved, but we still have hundreds of thousands of people

living in conditions no American could probably even fathom how

bad it is.

When you have metrics that say a third of the performance audits for the Department were either misstated, unsupported or not

46

validated, that raises a lot of red flags. When we are arguing about

whether or not the rubble removal is 5 or 10 percent, that is a

stunning number that is shocking 16 months after the effort.

When we are missing our goal by 65 percent in terms of building

the shelters, when we say we have only achieved less than 25 percent of the goal, it is just stunning and disappointing because the

resources of the United States being brought to bear, the support

you personally got from the President to make this stuff happen

and then see those results, again, just looking at the metrics, is

devastating. It is disappointing and it is unacceptable. That is my

concern.

If we can help moving forward, I look forward to working with

you. I appreciate your commitment and your tenacity. I know your

heart is in the right place. I appreciate you coming before this committee and spending time with us. There is lots to improve. I appreciate your attitude saying we can always improve.

At this point, we will hold this committee in adjournment. Thank

you.

[Whereupon, at 4:45 p.m., the subcommittee was adjourned.]

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