Foreign Assistance: U.S. Democracy Assistance for Cuba Needs Better Management and Oversight
Published: 2006-11-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: U.S. law authorizes aid for nonviolent democratic change in Cuba. From 1996-2005, the Department of State (State) and the U.S. Agency for International Development (USAID) awarded grants totaling $74 million to support such change. A presidential commission recently recommended increasing funding for these efforts. This report examines (1) agency roles in implementing this aid and selection of grantees; (2) types of aid, recipients, and methods of delivery reported in 2005; (3) oversight of grantees; and (4) data about the impact of this aid. To address these objectives, we analyzed the activities and internal controls, and USAID's oversight and management of, 10 grantees with about 76 percent (in dollars) of total active awards for Cuba democracy aid. Our review focused on USAID because State's first awards were not made until mid-2005.
section_title: What GAO Found
paragraphs: The Department of State State and USAID implement U.S. democracy assistance for Cuba through an interagency process. However, communication between these agencies was sometimes ineffective, most critically about grantees' on-island activities. About 95 percent ($62 million) of USAID's total awards were made in response to unsolicited proposals; however, after 2004, both USAID and State used formal competition to select grantees. Dissidents in Havana said that U.S. assistance provided moral support and enhanced their ability to work for democracy. In 2005, the 10 grantees we reviewed delivered humanitarian and other aid, training, and information to human rights and political activists, independent librarians and journalists, and political prisoners and their families. Assistance shipped to Cuba included food, medicine, clothing, office equipment and supplies, shortwave radios, books, and newsletters. Grantees also conducted international advocacy for human and workers' rights in Cuba and planned for a future democratic transition. Given the Cuban government's repressive policies and opposition to U.S. democracy assistance, grantees employed a range of discreet delivery methods that varied in terms of security, flexibility, and cost. The U.S. Interests Section in Havana, Cuba, a State post, has played an important role in distributing the aid provided by some grantees. Internal controls--both over the awarding of Cuba program grants and oversight of grantees--do not provide adequate assurance that the grant funds are being used properly and that grantees are in compliance with applicable laws and regulations. Preaward reviews of grantees were not always completed before awards, and USAID did not follow up adequately after awards to correct weaknesses in grantee policies, procedures, and accounting systems identified by these reviews. In addition, standardized grant agreements did not provide sufficient details to support program accountability or the correction of the weaknesses identified by preaward reviews. The Cuba program office also did not adequately manage at-risk grantees and lacked formal review or oversight procedures for monitoring grantee activities. We performed limited testing for 10 grantees and identified questionable expenditures and significant internal control weaknesses with 3 grantees that USAID had not detected. The Cuban government's active opposition to U.S. democracy assistance presents a challenging operating environment for State and USAID. Although USAID and its grantees have some evaluation and anecdotal information about program results, they have focused on measuring and reporting program activities, such as the volume of food, medicine, or books sent to Cuba. USAID recently took several steps to collect better information about program results, such as increasing staff expertise and meeting more regularly with grantees.

section_title: Letter
paragraphs: The Cuban government systematically restricts nearly all political dissent,  denying its citizens basic rights to free expression, association, and  assembly. The Cuba Democracy Act of 1992 and the Cuban Liberty and  Democratic Solidarity (LIBERTAD) Act of 1996 authorized the President  to provide assistance and other support for individuals and independent  nongovernmental organizations (NGO) to promote peaceful, nonviolent  democratic change in Cuba through various types of democracy-building  efforts. From 1996–2005, the U.S. Agency for International Development  (USAID) awarded 40 grants or cooperative agreements totaling $65.4  million to support the development of civil society in Cuba. In 2005, the  Department of State (State), through its Bureau of Democracy, Human  Rights, and Labor (DRL), awarded four grants totaling about $8.1 million  to support a range of democracy assistance activities for Cuba. In 2004 and  2006, the Commission for Assistance to a Free Cuba recommended  increasing funding for this type of assistance.
At your request, this report examines (1) the roles and objectives of the  agencies implementing U.S. democracy assistance targeted at Cuba, and  the funding, characteristics, and selection of the grantees receiving  awards under this program; (2) the types, amounts, and recipients of this  assistance in 2005 and the methods used to deliver it; (3) USAID’s  monitoring and oversight of these grantees; and (4) the availability of data  to evaluate whether U.S. assistance has achieved its goals. We plan to  issue a classified version of this report that provides additional  information about the methods used to deliver U.S. assistance to Cuba,  steps taken to reduce losses of assistance shipped to the island, and some  of the recipients of U.S. assistance in Cuba.
In conducting this review, we analyzed selected characteristics of the 34  grantees that received one or more of 44 State or USAID awards for this  assistance from 1996–2005. We also analyzed the reported activities,  assistance delivered, and management and internal controls for 10 USAID  grantees with 14 awards active in 2005 (representing about 76 percent of  total State and USAID awards for Cuba democracy assistance in terms of  dollars). We focused our review on USAID because State did not award its  first grants until mid-2005 and on grantees with several years experience  working with USAID on Cuba democracy assistance. At USAID and State  in Washington, D.C., and at the offices of grantees in our sample in  Washington, D.C., and Miami, Florida, we analyzed key records and  interviewed agency officials and grantees to understand U.S. and agency  assistance objectives and the processes used to select and monitor  grantees and evaluate program. At the Departments of Treasury (Treasury)  and Commerce (Commerce), we discussed export licenses required for  this assistance. We also interviewed officials at the National Endowment  for Democracy (NED), a private nonprofit corporation funded through  State’s annual appropriation that supports democracy promotion in Cuba  and other nations. We conducted fieldwork in Havana, Cuba, working out  of the U.S. Interests Section (USINT), a State post. In Havana, we  interviewed U.S. officials, leading dissidents, and foreign-embassy officials  and observed post activities. We conducted our work from August 2005  through November 2006 in accordance with generally accepted  government auditing standards. See appendix I for a more detailed  explanation of our scope and methodology.
subsections: section_title: Background
subsections: section_title: Conditions in Cuba Pose Substantial Challenges for U.S. Assistance
paragraphs: Conditions in Cuba—a hard-line Communist state that restricts nearly all  political dissent—pose substantial challenges to implementing,  monitoring, and evaluating democracy assistance. USAID does not work  cooperatively or collaboratively with the Cuban government, as it does in  most countries receiving U.S. democracy assistance. The United States  and Cuba do not have diplomatic relations, and the United States  maintains an embargo on most trade. USINT staff is restricted to Havana.  USAID does not have staff in Cuba, and Cuba program office staff have  been unable to obtain visas to visit the island since 2002. Additionally, the  range of Cuban partner organizations is significantly limited by U.S. law,  which generally prohibits direct assistance to the Cuban government and  NGOs with links to the government or the Communist Party.
Cuban law prohibits citizens from cooperating with U.S. democracy  assistance activities authorized under the Cuban Liberty and Democratic  Solidarity Act, punishable with prison terms of up to 20 years. Tactics for  suppressing dissent include surveillance, arbitrary arrests, detentions,  travel restrictions, exile, criminal prosecutions, and loss of employment.  Neighborhood committees (known as Committees for the Defense of the  Revolution) monitor residents’ activities; those identified as dissidents are  subject to intimidation (acts of repudiation), including psychological and  physical violence. Independent groups, dissidents, and activists face  constant harassment and infiltration by Cuban government agents. In 2003,  the Cuban government arrested and sentenced 75 leading dissidents and  activists to terms of up to 28 years in prison. The Cuban government  accused some of these individuals of receiving assistance from USAID  grantees. A Cuban human rights group known as Damas de Blanco  (Ladies in White), formed after the 2003 crackdown, consists of dissidents’  wives, mothers, and sisters who peacefully protest for the unconditional  release of political prisoners.
There is no free press in Cuba, and independent journalists are harassed  and imprisoned. The Cuban government also substantially restricts and  controls the flow of information, routinely monitoring international and  domestic telephone calls and fax transmissions. As of 2006, only about  200,000 Cubans out of a total population of 11 million had been granted  official access to the Internet. The use of satellite dishes, radio antennas,  fax machines, and cellular telephones is restricted due to high costs, laws,  and the threat of confiscation. The customs service also routinely  monitors mail, freight shipments, and visitors’ baggage for materials with  political content. Further, the government routinely jams all external, non- Cuban broadcasts, including the U.S. government-supported Radio and TV  Martí broadcasts.
section_title: Commission Recommends Increased Assistance and Identifies U.S. Objectives
paragraphs: The Commission for Assistance to a Free Cuba was established by the  President to identify measures to help end the Castro dictatorship and  identify U.S. programs that could assist an ensuing transition. The  commission’s May 2004 report recommended providing an additional $36  million to USAID, State, and other agencies’ grant programs supporting  Cuban civil society, as well as $5 million for worldwide public diplomacy  initiatives. The report also recommended the creation of a transition  coordinator for Cuba at State, a post created and filled in 2005.
The commission’s July 2006 report recommended providing $80 million  over 2 years to increase support for Cuban civil society, disseminate  uncensored information to Cuba, expand international awareness of  conditions in Cuba, and help realize a democratic transition. The report  also recommended subsequent annual funding of at least $20 million until  the end of the Castro regime. These funds would be in addition to current  funding for State and USAID democracy assistance programs and Radio  and TV Martí.
State and USAID officials said that the commission’s 2004 report provides  the policy framework for their agencies’ respective grant programs (see  table 1).
section_title: U.S. Assistance Supports Civil Society; Most Awards Were Based on Unsolicited Proposals
paragraphs: State and USAID lead interagency efforts to provide democracy assistance  to independent civil society groups and individuals in Cuba. However, we  found weaknesses in the communications between State and USAID  regarding the implementation of this assistance. State and USAID made  awards to three types of grantees: Cuba-specific NGOs, NGOs with a  worldwide or regional focus, and universities. Prior to 2004, all USAID  awards were based on unsolicited proposals. In 2004–2005, USAID and  State used a competitive process to select grantees. Since the program’s  inception, USAID extended the amount and length of about two-thirds of  the 40 grants and cooperative agreements it awarded.
subsections: section_title: State- and USAID-Led Interagency Process Implements U.S. Assistance
paragraphs: Since 1996, State and USAID have led the implementation of U.S.  democracy assistance focused on Cuba. We observed weaknesses in  communication between responsible State and USAID bureaus and  offices.
State’s Office of Cuban Affairs (under the Bureau of Western Hemisphere  Affairs) and USAID’s Cuba program office (under the Latin America and  Caribbean Bureau) have led the implementation of assistance programs  that support the development of democratic civil society in Cuba,  coordinating their activities primarily through an interagency working  group. This working group also includes representatives from the National  Security Council, Commerce (Bureau of Industry and Security, Foreign  Policy Controls Division), and Treasury (Office of Foreign Assets  Control).
USAID has funded democracy assistance grants and cooperative  agreements for Cuba since 1996. USAID’s Cuba program is overseen by a  director and one junior officer. In 2005, State initiated a grant program for  Cuba democracy assistance through DRL. Headed by an assistant  secretary, DRL leads U.S. efforts to promote democracy, protect human  rights and international religious freedom, and advance labor rights  globally. The Director of U.S. Foreign Assistance (who serves concurrently  as the USAID Administrator) is responsible for coordinating State and  USAID democracy assistance worldwide, with continued participation in  program planning, implementation, and oversight from the various  bureaus and offices within State and USAID, and is developing a strategic  framework and procedures to ensure that programs match priorities.
Table 2 outlines the roles and responsibilities of key executive branch  agencies in providing democracy assistance to Cuba.
As the table shows, USINT plays an important role in implementing State  and USAID democracy assistance focused on Cuba. In addition to these  tasks, USINT administers immigration and refugee programs, maintains  regular contact with Cuban activists and other embassy officials, and files  reports regarding human rights abuses.
Effective internal control requires effective communication with key  stakeholders who have a significant impact on whether an agency  achieves its goals. However, during our fieldwork in Havana and  Washington, D.C., we found that communications were sometimes  ineffective between State bureaus and offices, USINT, and USAID  regarding the implementation of U.S. democracy assistance focused on  Cuba. Most critically (given that USAID does not have staff in Cuba and  the Cuba program office staff cannot visit the island), routine  communication links between USAID and USINT had not been  established. Specific examples include the following:    USAID did not receive reports prepared by USINT assessing some  independent NGOs in Havana, although some of these organizations  received assistance from USAID grantees. These reports summarize the  observations made during USINT site visits and also recommended  adjustments in the level and type of assistance distributed to individual  NGOs. Given the lack of a USAID presence in Cuba, information provided  in these reports would improve USAID officials’ knowledge of how some  assistance is being utilized.
USAID’s Cuba program director did not participate in the evaluation and  ranking of democracy assistance proposals submitted to State’s DRL. (He  had an opportunity to provide comments after State’s review panel had  met.) The director said that he potentially could have provided important  “lessons learned” about these proposals, based on almost a decade of  experience implementing assistance in Cuba. State officials said that the  omission of the USAID Cuba program director from the technical review  panels was an oversight and that DRL would take steps to ensure USAID’s  participation on future Cuba panels.
USINT officials said that they received limited information from USAID  about its grantees’ on-island activities, such as specific groups or  individuals receiving U.S. support. The information these officials had  about such matters was based on direct contact with some grantees and  comments from dissidents. More complete information about grantee  activities would provide a basis for USINT to monitor and report more  systematically on groups and individuals receiving U.S. assistance.
USINT officials said that they had little advance knowledge of the types  and amounts of assistance that USAID grantees expected them to  distribute. In addition, they said that some grantee-provided books and  other materials had been inappropriate or ill-suited for promoting  democracy in Cuba. These officials stated that U.S. assistance would be  more effective if they had more advance information about—and input  into—grantee shipments. USAID officials agreed that better  communication is needed to coordinate these activities.
In commenting on this report, State and USAID officials recognized the  benefits of improved interagency communication on Cuba democracy  assistance and noted that they were taking steps in this direction, such as  providing USAID program officials with access to classified  communications between State and USINT. According to the USAID Cuba  program director, access to classified communications should allow better  coordination with USINT on grantee shipments to the island. In addition,  State said that DRL, the Bureau of Western Hemisphere Affairs, the Office  of the Cuba Transition Coordinator, and USAID would meet regularly to  share information gathered in quarterly meetings with grantees. USAID  officials commented that including the Cuba program office in interagency  working groups and weekly staff meetings of State’s Cuba desk would  improve operational coordination. Including the Cuba program office in  communications between USINT and grantees also would benefit USAID  grantee oversight and management.
section_title: U.S. Assistance Is Intended to Support the Development of Cuban Civil Society
paragraphs: USAID and State democracy assistance generally aims to support  independent civil society groups and individuals in Cuba. The 1992 and  1996 acts authorized support for individuals and independent NGOs in  Cuba, such as sending humanitarian assistance to victims of political  repression and their families; providing material and other support;  sending books and other information; and supporting visits and the  permanent deployment of independent human-rights monitors. The USAID  Cuba program’s strategic objective is “to help build civil society in Cuba by  increasing the flow of accurate information on democracy, human rights,  and free enterprise to, from, and within Cuba.” Table 3 summarizes the  DRL, USINT, and USAID program activities for democracy assistance  targeted at Cuba.
section_title: USAID and State Made Awards to Three Types of Grantees
paragraphs: In implementing their program objectives, State and USAID awarded 44  grants and cooperative agreements from 1996–2005 to 34 grantees in  three categories:    Cuba-specific NGOs received awards totaling $37.3 million (about 51  percent of the total value of the awards);   NGOs with a worldwide or regional focus received awards totaling $28.7  million (about 39 percent of the total value of the awards); and   Universities received awards totaling about $7.6 million (about 10 percent  of the total value of the awards).
All 34 grantees are U.S.-based, and most are located in Washington, D.C.,  or Florida. Table 4 summarizes State and USAID awards from 1996–2005.
Some of the NGOs with a worldwide or regional focus have a relatively  long history working on Cuba issues. In some cases, these NGOs have  received grants from NED. From 1984–2005, NED awarded 158 grants  totaling $13.3 million for democracy assistance for Cuba. Established by  Congress in 1983, NED is a private nonprofit corporation with the  purpose of encouraging and supporting activities that promote democracy  around the world. As part of its global grants program for “opening  dictatorial systems,” NED assistance to Cuba has focused on providing aid  to journalists, independent workers’ organizations, and cooperatives,  while maintaining exile-based programs that defend human rights, provide  uncensored information, and encourage dialogue about a country’s  political future. NED’s independent governing board makes decisions  about which assistance proposals the organization funds. In 2005, using a  $3 million grant from DRL, NED funded 16 Cuba-related grants totaling  about $2.2 million. (Four of the 16 grantees also have active USAID grants  for Cuba democracy assistance.)
section_title: Grantee Selection Was Based on Unsolicited Proposals until 2004
paragraphs: Our analysis showed that about 95 percent ($61.9 million) of USAID’s total  awards were made in response to unsolicited proposals. From 1996–2004,  USAID made 34 awards ($54.7 million) based on unsolicited proposals.  The unsolicited proposals were evaluated by the interagency working  group (see table 2). In 2004–2005, USAID made 5 awards ($3.5 million)  based on two requests for applications (RFA). The proposals received in  response to these RFAs were evaluated and ranked by two technical  evaluation committees that included State and USAID officials. In 2005,  USAID also made an additional award to a previous grantee for $7.2  million based on an unsolicited proposal. The USAID Assistant  Administrator for Latin America and the Caribbean authorized the  negotiation of awards for both unsolicited and solicited proposals. All  awards ultimately were approved by an agreement officer in USAID’s  Office of Acquisition and Assistance.
In keeping with the Federal Grant and Cooperative Agreement Act,  USAID policy encourages competitive awards for grants and cooperative  agreements in most circumstances so that the agency can identify and  fund the best projects to achieve program objectives. USAID’s general  policy is to award all grants and cooperative agreements competitively,  seeking applications from all eligible and qualified entities. However,  USAID policy permits funding unsolicited proposals (without the benefit  of competition) when certain criteria are met. For example, an unsolicited  proposal may be funded if USAID did not solicit the proposal and it  presents a unique or innovative approach, fully supports U.S. development  priorities, and demonstrates a unique capacity for the applicant to carry  out program activities. In such cases, USAID guidance requires that  officials explain the circumstances that justify funding these proposals.  The USAID Cuba program director told us that the interagency working  group (see table 2) had opposed prior attempts to employ a competitive  process for selecting grantees.
USAID’s successful use of competitive solicitations for some awards in  2004–2005 suggests that the Cuba program could have employed this  selection strategy for at least some prior awards. A total of 27 NGOs  responded to USAID’s 2004 and 2005 RFAs. USAID’s technical evaluation  committees found the proposals submitted by 12 of the 27 applicants  “within the competitive range” of the RFAs, and recommended awarding  cooperative agreements to 6 applicants and asking an additional 6 to  submit (revised) best and final proposals. Eight of the 12 applicants had  not received prior awards for U.S. democracy assistance for Cuba. In  technical comments on this report, USAID officials said that using a  competitive process will not always result in grantees different from those  that would be selected using a noncompetitive process.
All four State awards in 2005 ($8.1 million) were made competitively; two  of these awards ($4.5 million) were to USAID Cuba grantees. Proposals  received in response to State’s RFA were reviewed and evaluated by two  technical committees (panels) that included officials from State’s Western  Hemisphere Affairs, DRL bureaus, USINT; awards were approved by the  Assistant Secretary of State for Democracy, Human Rights and Labor. As  previously discussed, the USAID Cuba program director received copies of  the proposals for comment but did not participate in the technical panels.  In commenting on this report, State officials said that DRL would continue  to the greatest extent possible to use a competitive process for Cuba  grants. State officials also said that DRL’s standard practice is to solicit  participation by USAID and the appropriate regional bureau on all its  evaluation panels, and that they will ensure that this policy is followed on  future Cuba panels.
section_title: Agreements Often Modified to Increase Funding and Extend Completion Dates
paragraphs: Our analysis showed that USAID modified 28 of the 40 agreements  awarded between 1996 and 2005 to increase funding, extend program  completion dates, or both. In several cases, these modifications  substantially altered grantees’ project objectives. These modifications  increased the aggregate value of these agreements nearly eight-fold—from  about $5.9 million to nearly $50.1 million—and extended the program  completion dates by an average of about 3 years. Between November 1997  and May 2006, USAID had modified 12 agreements that we reviewed in  detail (see fig. 1). These modifications increased the aggregate value of  these agreements from about $4.8 million to nearly $42.3 million and  extended the program completion dates by an average of about 4.6 years.
USAID policy requires that some modifications and extensions be justified,  such as those that extend the life of the award and simultaneously either  increase the total estimated amount of the award or change the program  description. Officials must explain why the benefits of continuing the  assistance activity with the same grantee exceed the benefits of a  competitive process favored by law and agency policy. USAID Cuba  program officials stated that they modified existing agreements (rather  than initiating new ones) to prevent disruption of assistance programs.  Additionally, officials said that they wanted to avoid the administrative  burdens associated with awarding new grants or cooperative agreements.  However, USAID procurement officials told us that, whether modifying an  existing agreement or making a new noncompetitive award to the same  grantee, a similar amount of work is required. These officials also  identified several advantages to closing out awards and making new ones.  Following established closeout procedures, for example, provides  additional assurance that grantee expenditures to date have been  appropriate, and end-of-project reports provide important information  about project accomplishments and failings to date. As discussed in a  following section, the Cuba program office has decided to require grantees  to submit interim evaluations when requesting significant project  modifications or extensions.
section_title: Grantees Provided Assistance and Information to Recipients Using Several Methods; USINT Played Active Role
paragraphs: USAID reports that its grantees have provided a wide range of democracy- related assistance since the Cuba program’s inception. In 2005, the 10  grantees that we reviewed delivered humanitarian and material assistance,  training, and information to Cuba. In addition, several of these grantees  worked to increase international awareness of the Cuban regime’s human  rights record; others planned for a democratic transition in Cuba.  Recipients of U.S. humanitarian and material assistance, training, and  information included human rights activists, political dissidents,  independent librarians, journalists, and political prisoners and their  families. Grantees employed several methods to deliver these items to the  island. According to grantees and U.S. officials, these methods involve  different security, flexibility, and cost considerations. Increasingly since  2000, USINT has distributed some grantee-funded assistance directly.
USINT also provides information, electronic equipment, and other support  to Cubans using its own funding.
subsections: section_title: U.S. Democracy-Related Assistance Since 1996
paragraphs: According to data provided by USAID, from 1996 to 2006 the Cuba  program provided the following assistance: 385,000 pounds of medicines,  food, and clothing; more than 23,000 shortwave radios; and millions of  books, newsletters, and other informational materials. In addition, USAID  reported that U.S. assistance supported journalism correspondence  courses for more than 200 Cubans, the publication of about 23,000 reports  by independent Cuban journalists about conditions or events in Cuba, and  visits to Cuba by more than 200 international experts to help train and  develop independent NGOs.
Dissidents we interviewed in Cuba said that they appreciated the range  and types of U.S. democracy assistance, that this assistance was useful in  their work, and that this aid demonstrated the U.S. government’s  commitment to democracy in Cuba. Dissidents said they appreciate the  moral support that U.S. assistance provides, and that this aid enhanced  their ability to continue their pro-democracy work.
section_title: Grantees Provided Four Types of Assistance in 2005
paragraphs: In 2005, the 10 grantees we reviewed reported activities in four categories:  (1) providing humanitarian and material assistance and training to  independent civil society groups and individuals; (2) disseminating  uncensored information to, within, and from Cuba; (3) increasing  international criticism of the Cuban regime by highlighting its human and  workers’ rights violations; and (4) planning for a future transition to  democracy by sponsoring conferences and publishing studies. Our  analysis of quarterly reports and other records show that these grantees  provided substantial assistance in 2005 (see table 5).
In technical comments on this report, USAID officials said that the  purpose for providing novels, video games, children’s coloring books, and  some other items listed in table 5 is to attract Cubans to independent  libraries and other organizations so that they can review other materials  on democracy, free markets, and other subjects.
Eight grantees also reported conducting international outreach and  advocating for human and workers’ rights causes in Cuba (either directly  or through subgrantees). Our analysis of quarterly reports shows that  these grantees were involved in organizing or participating in the following  types of activities in 2005:    conferences and meetings held by groups such as the United Nations  Human Rights Commission in Geneva, Switzerland, and the Organization  of American States General Assembly, in Ft. Lauderdale, Florida;   meetings with foreign government and political leaders to discuss human  and workers’ rights in Cuba and possible support for activists;   conferences and meetings of civil society groups;    press conferences, news releases, and other events related to human    mail, e-mail, and letters distributed to foreign government officials.
One grantee was primarily focused on planning for a democratic  transition. This grantee reported that it commissioned academic studies,  compiled databases, and organized seminars in the United States and a  Latin American country. These resources were made available in print and  online.
section_title: Recipients of U.S. Assistance Included a Range of Cuban Civil Society Groups
paragraphs: Our analysis of quarterly reports and other records shows that the  recipients of U.S. assistance in 2005 included political prisoners and their  families, independent librarians, journalists, political parties, labor  organizations, other civil society groups and activists, and, to a lesser  extent, the general Cuban public (see table 6).
According to USINT officials, recipients sometimes give away or sell  books, magazines, newspapers, or other assistance. According to senior  USINT officials, these actions may have the unintended effect of  expanding the reach of U.S. assistance. Senior U.S. officials viewed these  losses due to confiscation or reselling as an unavoidable cost of providing  democracy assistance in Cuba’s repressive political and economic  environment. However, in technical comments on this report, USAID  officials said that, despite potential benefits of expanding the reach of US  assistance, selling such assistance is not allowed under USAID policy.  USAID recently sent an e-mail to its grantees reminding them that they are  forbidden to sell or knowingly condone the selling of humanitarian aid or  other assistance by recipients.
section_title: Several Methods Used to Deliver U.S. Assistance
paragraphs: The grantees in our sample reported using several methods to deliver  humanitarian aid and material assistance, training, and informational  materials to Cuba. Grantees and U.S. officials said that these methods  involved different security, flexibility, and cost considerations. For  example, the estimated cost of delivering humanitarian or material  assistance to the island ranged from about $4 to $20 per pound.
Some grantees have taken steps to reduce the risk of loss—due to theft or  confiscation by the Cuban government—of assistance shipped to Cuba.  Dissidents we interviewed in Havana said that the assistance they received  from USAID and State grantees (and other organizations) was sometimes  interrupted. In addition, USAID officials said that the Cuban government  closed some independent libraries and confiscated their books and  equipment in 2005.
We plan to issue a classified version of this report that would provide  additional information about the methods used to deliver U.S. assistance  to Cuba, steps taken to reduce losses of assistance shipped to the island,  and some of the recipients of U.S. assistance in Cuba.
section_title: USINT Delivers Some Grantee and Other Assistance
paragraphs: USINT data shows that it delivers assistance and information to more than  2,500 individuals and groups in Cuba. In 2005, for example, the office  distributed over 269,000 books, magazines, articles, pamphlets, and other  materials. According to U.S. officials, USINT’s role delivering democracy  assistance has increased since 2000—as indicated by the substantial  increase in the volume. These officials also said that further expanding  the volume of items distributed would require additional staff and  resources.
The assistance delivered by USINT was funded by State and USAID  grantees as well as by USINT. According to U.S. officials, USINT  purchased materials, equipment, and information, including U.S. national  news and professional magazines, such as the Spanish-language versions  of Newsweek, The Economist, Art in America, The Atlantic, Popular  Mechanics, and Downbeat. In 2004, the office also purchased equipment,  materials, and an electronic subscription allowing it to publish onsite 300  copies of El Nuevo Herald daily newspaper. USINT also purchased and  distributed radios, laptop computers, and DVD players. Some of this  material and information distributed by USINT is redistributed by  individuals and groups to other locations in Cuba.
During our fieldwork at USINT, we observed employees unload, sort, and  distribute shipments sent by USAID grantees and one U.S.-based NGO, as  well as items purchased by USINT. Shipments included materials for  independent librarians and journalists, artists, musicians, academics and  teachers, churches, and foreign diplomats. Some of these shipments were  addressed to specific individuals. USINT officials said that they deliver  information directly to some Cuban government officials. USINT officials  also distribute literature and equipment to Cubans visiting the consular  section for visas or other business.
As part of its public diplomacy efforts, USINT provides videoconferencing  capabilities and public Internet access to facilitate the work of State and  USAID grantees. For example, grantees use Internet-based video  conferencing for training sessions. We observed a training session  organized by one USAID grantee for approximately 20 independent  journalists. In addition to the training, the participants said that they had  received other U.S. assistance, such as equipment, supplies, and help in  publishing their stories outside Cuba. USINT also provides public access  to about 20 computers with Internet access, printers, and copiers. During  our fieldwork, we observed that a number of Cuban activists used these  computers. The computers also appeared to be popular with the Cuban  public—reservations for using them were booked for a month in advance,  according to USINT employees managing this equipment.
Additionally, as part of USINT’s public diplomacy program, the public  affairs office also compiles and selects daily news clippings and quotes to  display on an electronic billboard news ticker located on USINT’s exterior.  This billboard was installed in January 2006 to display information for  people passing the building, which is located on a major Havana street and  pedestrian walkway.
section_title: Monitoring and Oversight of Cuba Program Grants Did Not Provide Adequate Assurance That Funds Were Used Properly
paragraphs: USAID’s internal controls over both the awarding of Cuba program grants  and the oversight of grantees do not provide adequate assurance that the  grant funds are being used properly or that grantees are in compliance  with applicable laws and regulations. The Guide to Opportunities for  Improving Grant Accountability states that organizations that award  grants need good internal control systems to provide adequate assurance  that funds are properly used and achieve intended results. However, we  found some weaknesses in internal control in the preaward, award,  implementation, and closeout phases of Cuba-program grants  management. The agency’s preaward reviews of grantees often were not  completed prior to grant awards, and USAID auditors did not adequately  follow up to correct deficiencies after grant awards. In addition, the  standardized terms and conditions of grants and cooperative agreements  lacked the detail necessary to support adequate accountability;  specifically, the grants and cooperative agreements did not include a  requirement for an acceptable internal control framework, nor did they  contain provisions for correcting deficiencies noted by preaward reviews.  USAID’s Cuba program office also does not have adequate policies and  procedures for assessing grantee risks in order to put in place proper  procedures to reduce that risk. In addition, a lack of adequate oversight  and monitoring by USAID’s program office allowed for questionable  expenditures by grantees to go undetected; moreover, grantee compliance  with cost-sharing provisions was not adequately addressed. The program  office also did not provide adequate training to grantees and does not  appear to routinely follow prescribed closeout processes. These  weaknesses in agency and program office internal control policies and  procedures contributed to internal control deficiencies we found at 3 of  the 10 grantees we reviewed, leaving USAID’s Cuban democracy program  at increased risk of fraud, waste, and abuse. We referred the problems we  identified at these 3 grantees to the USAID Office of Inspector General.
subsections: section_title: USAID’s Preaward Processes Were Inadequate
paragraphs: USAID guidance requires grant officers to determine whether the potential  recipient possesses, or has the ability to obtain, the necessary  management competence in planning and carrying out assistance  programs, and whether it practices mutually agreed upon methods of  accountability.
As addressed in the Guide to Opportunities for Improving Grant  Accountability, an effective review performed before the award—which  includes a general review of the control environment and the control  activities in place—helps to detect and correct control weaknesses that  could contribute to potential fraud, waste, and abuse of grant funds. The  potential grantee can then correct these weaknesses before USAID  provides funding. During our site visits, we identified fundamental internal  control weaknesses at three grantees that might have been mitigated if  USAID had performed more timely preaward reviews and performed the  necessary follow-up on findings. (Table 7 lists some examples of the  internal control weaknesses we identified at these three grantees.)
First, in four of the eight instances in which preaward reviews were  conducted, the reviews were completed after the awards were made.  According to USAID officials, these four reviews were issued from 3–33  days after the award date primarily because of staffing shortages.  However, in technical comments on our report, USAID officials said that  the agreement officer received oral findings from USAID or Defense  Contract Audit Agency auditors before the final report.
We also identified one preaward review conducted for USAID by the  Defense Contract Audit Agency that appears to have had limitations and  weaknesses in its implementation. This review, dated November 20, 2002,  concluded that one of the three grantees for which we identified  fundamental internal control weaknesses had an adequate accounting  system. However, during our site visit in 2006, this grantee could provide  only some paid invoices and bank statements for transactions before  February 2005. These records were insufficient for tracking and reporting  accumulated grantee expenditures or reconciling bank accounts.
Second, USAID’s follow-up on preaward reviews was insufficient to  provide assurance that deficiencies and weaknesses found during the  preaward reviews were adequately addressed. Five of the eight preaward  reviews we assessed made recommendations for correcting deficiencies in  the grantees’ accounting systems that could adversely affect grantees’  ability to record, process, summarize, and report direct and indirect costs.  However, the corresponding grants and cooperative agreements did not  include specific provisions for correcting these deficiencies. Moreover,  although all eight reviews we assessed recommended follow-up reviews,  USAID did not conduct most of them in a timely fashion. In one case,  USAID did not conduct a follow-up review until 3 years after such a review  was recommended in an initial review. In technical comments on this  report, USAID officials said that in the past there were some instances  where resources for preaward and follow-up reviews were not available,  but that obtaining funding for these reviews is generally a priority for  USAID and the Office of Acquisition and Assistance. USAID officials stated  that the Office of Acquisition and Assistance will work with the Cuba  program office to ensure information regarding grantee audits is  communicated to all appropriate staff in a timely manner and that if any  subsequent audits are necessary, adequate funding will be made available.
section_title: Grant Agreements Did Not Support Program Accountability
paragraphs: We performed a detailed review of four cooperative agreements and one  grant agreement that USAID signed between 1997 and 2005 for democracy  assistance for Cuba. These agreements had a variety of objectives,  ranging from providing humanitarian assistance to dissidents and their  families to providing information about conditions in Cuba to the Cuban  public and the international community. In general, however, the  standardized language of the agreements did not contain sufficient detail  to address the unique objectives of each grant, the grantee’s internal  controls, or the remediation of known grantee deficiencies. This increases  the risk that grantees will use program funding, either unintentionally or  intentionally, for purposes that are not intended by the program and that  program assets will not be adequately safeguarded.
According to the Guide to Opportunities for Improving Grant  Accountability, the terms, conditions, and provisions in the award  agreement, if well designed, can render all parties more accountable for  the award. The terms and conditions in the USAID grants and cooperative  agreements we reviewed generally lacked the detail necessary to provide  adequate guidance to grantees. For instance, although providing  humanitarian assistance is a common objective, the agreements provided  insufficient detail for grantees to differentiate between allowable and  unallowable types of such assistance. In addition, rather than providing  guidance in the agreement document, the agreements pointed to  additional sources of rules and regulations, including supporting  legislation that the grantees might have difficultly locating or  implementing without additional guidance. For example, the agreements  do not contain details about acceptable cost-sharing contributions, but  instead direct grantees to the Code of Federal Regulations. The grant  agreements we reviewed also did not include provisions requiring grantees  to establish and maintain an acceptable internal control system or, as  previously discussed, provisions for correcting deficiencies identified  during preaward reviews.
section_title: Cuba Program Office Inadequately Monitored and Oversaw Grant Implementation
paragraphs: Internal controls should be designed to provide for ongoing monitoring in  the course of normal operations. We identified several weaknesses in the  USAID Cuba program office’s oversight and monitoring of grantees’  implementation of grants and cooperative agreements, including the lack  of policies and procedures for identifying at-risk grantees, formal  oversight of grant implementation, and a framework for monitoring cost  sharing. In addition, the program office provided inadequate training to  grantees. These weaknesses exist in a restrictive environment where the  Cuban government precludes Cuba program officers from directly  observing the use and outcomes of the assistance.
subsections: section_title: Policies and Procedures for Mitigating Risks at At-Risk Grantees Are Inadequate
paragraphs: The USAID Cuba program office does not have adequate policies and  procedures for assessing and managing the risks associated with specific  grantees. USAID Cuba program officials have not performed a formal risk  assessment of the grantees providing assistance to Cuba, although they  said that they consider recipients of larger awards to be higher risk. Larger  recipients often are subject to the Single Audit Act and annual financial  statement audits, and are therefore subject to internal control and  compliance testing. The program director and program office staff said  that they visit grantees at least quarterly. However, one of the grantees we  reviewed said that USAID officials do not conduct formal financial  oversight visits to their office. Visits to large and small grantees were not  formally documented and were not based on structured oversight  procedures. In addition, the USAID program office also performed limited  to no reviews of the financial records for recipients, increasing the risk  that they would operate without effective controls. USAID Cuba program  officials said that if the applicant had a prior history of managing USAID or  U.S. government contracts or grants, USAID contacted the cognizant  USAID or other federal agency technical officer for information about  those awards. For applicants without a prior history of managing such  federal awards, the program office verifies that the applicant had received  501(c)(3) status from the Internal Revenue Service (IRS). USAID also  conducts local inquiries to verify the reputation and qualifications of the  applicant.
section_title: USAID Does Not Effectively Monitor Grant Project Implementation
paragraphs: USAID’s Cuba program office does not have a formal grantee monitoring  and oversight process to help ensure accountability for grant funds. We  found key weaknesses in the oversight USAID did provide.
First, USAID lacked adequate documentation of the grantees’  implementation plans. Five agreements between USAID and grantees  specified that grantees were to submit implementation plans for approval  before initial disbursements. A USAID official said the plans had been  communicated orally or included in the grantees’ initial proposals.  However, we found inadequate documentation in USAID’s files to support  this. In addition, some grantees with whom we spoke lacked an  understanding of USAID’s requirements for implementation plans. For  example, two grantees could not confirm the existence of implementation  plans for their respective grants.
Second, USAID did not require grantees to submit detailed, well-supported  quarterly reports and did not have a formal process for reviewing those  reports. Along with a narrative report, USAID requires grantees to submit  one-page quarterly financial reports (but not supporting documentation)  to validate underlying expenditures. Although grantees provide summary  amounts for expenditures and obligations, the financial information  required by USAID in the quarterly reporting process is not sufficiently  detailed to help the program office identify potentially inappropriate  expenditures. In addition, USAID does not have a formal process for  reviewing this reporting. The lack of formal quarterly review procedures  and documentation reduces USAID’s ability to identify and correct  inappropriate expenditures by grantees. In technical comments on this  report, USAID officials said that the Paperwork Reduction Act limits  USAID’s ability to require, as a general rule, grantees to report information  in addition to that required under OMB circular A-110 and 22 CFR Part 226  without approval from OMB. USAID officials said that they will consider  pursuing OMB approval.
Third, USAID does not have a protocol for monitoring visits to grantees  and does not document the results of those visits. Our Standards for  Internal Control in the Federal Government addresses the need for  developing and implementing detailed procedures for grantee monitoring.  During our fieldwork, we accompanied USAID Cuba office staff on site  visits to several grantees. During this fieldwork, we observed that USAID  officials did not use a structured review process or coordinate their  reviews to prevent gaps or duplication of efforts. USAID officials did not  prepare trip reports or other written summaries of their observations  during these site visits. Some grantees stated that program officials  generally examined only a limited number of invoices during their visits.  One program office staff member said that, during site visits, he typically  spent about an hour interviewing grantee representatives and reviewing  records at each grantee.
section_title: USAID Cuba Office Lacks Framework for Monitoring Cost Sharing
paragraphs: USAID’s Cuba program office did not have a framework for overseeing  grantee compliance with cost-sharing requirements in their grants and  cooperative agreements and could not determine whether grantees were  complying with these requirements. Cost sharing, an important element of  the USAID–grant recipient relationship, is applied to certain grantees on a  case-by-case basis. If USAID includes a cost-sharing provision in an  agreement, the respective grantee must finance a specified amount of  activity costs using nonfederal funds. Some agreements allow grantee  contributions to include nonmonetary contributions, such as services and  property, in addition to cash contributions.
Twelve of the 13 USAID agreements we reviewed contained cost-sharing  provisions, totaling about $7.6 million. In some cases, the grantee’s cost  share was a significant portion of the total amount of assistance  authorized under the agreement. For example, one grantee’s initial share  represented 56 percent of the total estimated program amount. Moreover,  as previously discussed, the cost-sharing provisions we reviewed offered  little guidance about the allowable sources of cost-sharing funds or the  methods for valuing non-monetary contributions applied toward the cost  share, instead directing grantees to the Code of Federal Regulations.
Grantees are required to periodically report to USAID the amounts they  have spent as their portion of the cost sharing. However, based on a  review of grantee documentation and interviews with agency staff, we  determined that USAID does not systematically monitor grantee  compliance with cost-sharing requirements. For example, staff does not  use a work program or structured methodology to determine whether  grantees comply with cost-sharing provisions in their respective  agreements.
Two of the USAID grantees we reviewed reported that they complied with  USAID grant regulations by applying funds received under grants from  NED toward their required share of program costs. USAID grant  regulations at 22 CFR 226.23 require grantees to meet their cost-sharing  requirement with nonfederal resources. For the purpose of complying with  USAID grant regulations on cost-sharing requirements, it is unclear  whether funds received under grants from NED constitute federal or  nonfederal resources. USAID officials, after consulting with State and  NED officials, have determined that NED funds provided from U.S.  government sources cannot be used by NED grantees to meet required  cost-share contributions under USAID regulations. USAID officials said  that they will address the proper use of NED grant funds provided from  U.S. government sources in relation to existing and future USAID grants.
section_title: USAID Does Not Provide Adequate Training to Grantees
paragraphs: One important role for a grantor program office is the training and guiding  of program grantees, as discussed in the 2005 Guide to Opportunities for  Improving Grant Accountability. However, USAID does not provide  formal grant management training to help grantees understand the  regulations, policies, and procedures governing grant funds. According to  USAID officials, limited English proficiency has created additional  challenges for some of the smaller grantees. The Cuba program director  stated that he had wanted to provide formal training to certain grantees,  but was concerned about the grantee reaction to creating training  requirements for some, but not all, grantees. In technical comments on this  report, USAID officials said that although grantees are responsible for  understanding and complying with grant provisions and federal laws and  regulations, USAID will consider providing Spanish language technical  assistance to grantees to build NGO capacity for financial management.  USAID also is pursuing providing grant and regulation information to  grantees in Spanish.
section_title: USAID Does Not Appear to Routinely Follow Prescribed Closeout Processes
paragraphs: Closeout processes can be used for identifying problems with grantee  financial management and program operations, accounting for any real  and personal property acquired with federal funds, making upward or  downward adjustments to the federal share of costs, and receiving refunds  for unobligated funds that the grantee is not authorized to retain. USAID  did not provide us with evidence that they routinely performed closeout  processes for some agreements. Currently, USAID guidance states that if  a U.S. grantee requires a closeout audit, the Office of Acquisitions and  Assistance must include a closeout audit request in the next regularly  scheduled audit of the organization. In technical comments, USAID  officials said that such audit requests are no longer made because the  agency uses a database system to track whether grantees required to have  closeout audits receive one in accordance with agency policies and  procedures. The Office of Acquisitions and Assistance recognizes that the  current written policy regarding closeout procedures is outdated and is  working to update it.
section_title: USAID’s Weaknesses Contributed to Deficiencies Observed at Three Grantees
paragraphs: During our limited reviews, we identified fundamental internal control  weaknesses at 3 of the 10 grantees that most likely would have been  identified had USAID followed up on weaknesses identified by preaward  reviews. In addition, the lack of adequate oversight and monitoring by  USAID’s program office allowed for questionable expenditures by three  grantees to go undetected. Table 7 summarizes the internal control  weaknesses we observed at these grantees.
The 3 grantees discussed in table 7 accounted for about 9 percent ($4.7  million) of the awards received by the 10 grantees we reviewed. Two of  the 3 grantees detailed above did not maintain adequate records of the  amount and type of assistance or materials sent to Cuba, the methods and  dates assistance was sent or transmitted, or efforts to verify that  assistance was received. Additionally, these two grantees had not  established systematic procedures for gathering, documenting, and  reporting this information.
For these three grantees, we identified numerous questionable  transactions and expenditures that USAID officials likely would have  identified had they performed adequate oversight reviews. For example,  two grantees had inadequate support for checks written to key officials of  that organization. In addition, one of these two grantees could not justify  some purchases made with USAID funds, including a gas chainsaw,  computer gaming equipment and software (including Nintendo Gameboys  and Sony Playstations), a mountain bike, leather coats, cashmere  sweaters, crab meat, and Godiva chocolates. According to this grantee’s  proposal, USAID funds were to be used to provide humanitarian  assistance and information to dissidents and their families. Subsequent to  our questions regarding these purchases, the grantee’s executive director  wrote us that he intended to submit corrections to USAID for some of  these charges.
In conjunction with the USAID Assistant Administrator for Latin America  and the Caribbean and the Cuba program director, we referred the  problems we identified at the three grantees discussed in table 7 to the  USAID Office of Inspector General. An investigator said that the Office of  Inspector General was investigating these three grantees.
Based on our limited review, 7 of the 10 grantees appear to have  established systematic procedures for documenting, tracking, and  reporting on the use of grant funds. These 7 grantees accounted for about  91 percent ($47.2 million) of the awards received by the 10 organizations  that we reviewed (see footnote 44). The operating procedures at some of  these 7 grantees are likely the result of pre-existing internal control  operating characteristics (and do not reflect USAID monitoring and  oversight). These grantees also had detailed records of their respective  activities. For example, one grantee maintained an inventory and signed  receipts for humanitarian shipments to Cuba, and dated, handwritten  notes of telephone calls or other communications to verify receipt of  shipments. Another grantee maintained detailed records of the methods  used, quantities of printed material transmitted, and copies of  communications as evidence of receipt.
section_title: Some Data Available about the Impact of U.S. Assistance
paragraphs: Agencies and grantees face an operating environment in Cuba that  presents monitoring and evaluation challenges. USAID has conducted  some program evaluation, but has not routinely collected program  outcome information from its grantees. Instead, USAID and its grantees  have largely focused on measuring and reporting program activities. In  2005–2006, however, USAID began to focus on collecting better  information about the results of U.S. democracy assistance.
subsections: section_title: Operating Environment Presents Monitoring and Evaluation Challenges
paragraphs: The operating environment in Cuba poses a range of challenges to  monitoring and evaluating U.S.-funded democracy assistance. Challenges  include:    The lack of USAID presence in Cuba and the inability of the USAID staff to  travel there, because the Cuban government actively opposes U.S.  democracy assistance.
The lack of operational coordination and routine communication links  between State and USAID (as previously discussed).
Grantee reluctance to share information with other grantees because of  concerns about potential Cuban government infiltration of grantee  operations.
USAID and grantee concerns that sensitive agency records could be  disclosed in response to Freedom of Information Act requests (as  previously discussed).
U.S. officials and grantees cited potential danger to dissidents and activists  in Cuba if sensitive information was released or disclosed.
The USAID Cuba program director said that in this environment, strict  cause and effect relationships between the USAID program and changes in  Cuban civil society are difficult to establish and document. Compared  with activities in Cuba, off-island activities, such as those at U.S.  universities, are generally easier to carry out, monitor, and evaluate,  according to USAID officials. However, off-island activities have a less- evident and slower impact on Cuban society and politics.
section_title: USAID and Grantees Have Conducted Some Evaluations of Cuba Assistance
paragraphs: USAID’s Cuba program office and its grantees have conducted some  evaluations of U.S. assistance, but these studies have been limited in  number and scope. USAID officials also have informally interviewed  Cuban dissidents and émigrés about the receipt and effectiveness of U.S.  assistance, but they did not systematically document, compile, or analyze  the results of these interviews. Although USINT has assessed some  independent libraries in Cuba, USAID has not received its reports.
subsections: section_title: USAID and Grantee Evaluations of Cuba Assistance
paragraphs: USAID and its grantees have conducted some evaluations of U.S.  democracy assistance for Cuba (see table 8). Generally, however, these  efforts have not reflected a systematic approach to program evaluation,  although some benefits resulted.
The USAID program director also has conducted a number of informal  interviews with Cuban dissidents and members of independent Cuban  NGOs able to travel outside Cuba. Although limited by Cuban government  controls on travel, these opportunities provided USAID with some ability  to verify the receipt and impact of grantee assistance directly, according to  USAID officials. For example, the program director was able to verify that  some dissidents had received, and continued to use, computers shipped to  the island. In other cases, USAID has relied on USINT reporting to verify  receipt of such assistance. However, these interviews and discussions  were conducted on a sporadic basis, and USAID officials did not  systematically document, compile, or analyze the results.
section_title: USINT Assessments of Independent NGOs in Cuba
paragraphs: USINT officials have done some monitoring of assistance (books,  equipment, and supplies) distributed to about 100 independent NGOs in  Havana. (USINT employees distributed this assistance, which it and  USAID grantees had purchased.) As we observed during our fieldwork,  USINT employees kept records of unannounced inspection visits to these  organizations and submitted summary reports to USINT officials. Based on  these reports, USINT officials have recommended increases or decreases  in the level and type of assistance provided to these NGOs. Although there  have been documented losses at some of these organizations, USINT  officials said such losses were unavoidable in Cuba and that their policy is  to continue providing some limited assistance to these NGOs. As  discussed previously, however, USAID has not received these reports.
section_title: USAID and Grantees Have Focused on Measuring and Reporting Program Activities
paragraphs: USAID and its grantees have not routinely collected and reported data and  other information about the results or impact of the democracy assistance  they have provided. USAID’s reports have focused primarily on measures  of program activities. The Cuba program office’s accomplishment reports,  updated on a monthly basis, consolidate quantitative data about activities  and related information submitted quarterly by grantees, such as the  number of books, newsletters, and other informational materials sent to  the island; the number of reports published by Cuban independent  journalists; and instances where the international community denounced  Cuban government human rights violations. The Cuba program’s annual  operational plan takes a similar approach. USAID officials said that data  about shipments of books, newsletters, and other informational materials  provide a measure of the flow of information to Cuba. The officials also  said that data about the number of independent journalists published  outside Cuba on the Internet (or in hard copy) provide a measure of the  flow of information from Cuba. However, these reports and data do not  provide an assessment of the impact or contribution of these activities in  the context of helping to build civil society in Cuba (part of the USAID  Cuba program’s strategic objective) or the effectiveness of U.S. assistance  in achieving broader U.S. democracy goals and objectives for Cuba.
In addition to measures of program activities, USAID officials point to the  total number of nonviolent acts of civil resistance in Cuba, as reported in  annual Steps to Freedom reports, as a proxy indicator for measuring the  positive impact of U.S. democracy assistance. Rich in detail about Cuba’s  dissidents, the reports show that total nonviolent acts of civil resistance  increased from about 600 acts in 2001 to about 1,800 in 2004. However, the  reports show that, between 2002 and 2004, the number of less intense  nonviolent acts of civil resistance increased while the number of more  intense acts declined. In commenting on a draft of our report, State  officials said that this decline coincided with the Cuban government’s 2003  crackdown on dissidents. Annual reports on human rights conditions in  Cuba prepared by Amnesty International, Human Rights Watch, and State  covering the same period (2001–2004) portray a more complex and  ambiguous human rights situation than the generally positive trend shown  by the indicator in the Steps to Freedom reports.
Grantees’ quarterly reports to USAID are the main vehicle for reporting  performance information. The quarterly reports submitted by 10 grantees  in 2005 consistently provided data about program activities. However,  these reports generally did not provide a focused analysis of program  accomplishments. Only two organizations consistently identified program  results as part of their quarterly reporting. For example, one grantee’s  reports discussed the results of assistance activities in the context of the  broader Cuban pro-democracy movement and short- and long-term civil  society goals. USAID officials said that they had repeatedly emphasized to  grantees the importance of including information about project results in  their reporting. The USAID Assistant Administrator for Latin America and  the Caribbean and the Cuba program director said that the director had  discussed this topic at grantee meetings held several times each year.
section_title: USAID Program Office Has Started to Focus on Collecting Better Information
paragraphs: Since 2005, USAID’s Cuba program has taken several steps to improve  data collection and its communication with grantees. These include:  Increasing staff expertise and meeting more regularly with grantees. In  2005, a staff member with experience in grant management and  performance evaluation joined USAID’s Cuba office; this staff member  developed, and began using, a set of structured questions to gather and  record grantee performance information. This new staff member also  began to meet and regularly communicate with grantees. However, the  staff member said that the office’s small number of staff makes effective  program monitoring and evaluation challenging.
Improving information in grantees’ quarterly reports. The Cuba program  acknowledged that quarterly reports submitted by grantees have not  included important information about program activities and results.  Several grantees said that they were unsure of what evaluation-related  information to include in reports and had received relatively little  guidance from USAID until recently. According to USAID, smaller grantees  have experienced greater challenges in this regard because of their lack of  experience working with USAID and because of their limited English  proficiency. USAID officials acknowledged grantees had not been  provided formal training in program evaluation.
In July 2006, USAID’s Cuba program office e-mailed grantees a more  detailed description of the types of data and other information to include  in their quarterly reports, as part of a series of e-mails to remind grantees  of USAID laws, regulations, and policies. USAID staff said that they are  working with grantees to improve the quality of their quarterly reports and  that they intend to issue additional written guidance.
Requiring intermediate program evaluations. In 2006, recognizing that  the frequent use of agreement modifications and extensions had  postponed end-of-project evaluations for many grantees, the Cuba  program office decided to include terms in future grants and cooperative  agreements requiring grantees to submit interim evaluations when  requesting significant project modifications or extensions.
section_title: Conclusions
paragraphs: In the context of recent recommendations to increase funding for  democracy assistance in Cuba, we conclude that the U.S. government’s  efforts to support democratic political change face several significant  challenges. Some of these challenges stem from the difficult operating  environment in Cuba, while others are the result of weaknesses in the  managerial oversight the program has received to date. Recently, however,  USAID has taken some steps to establish improved policies and reporting  procedures.
Effectively delivering democracy-related assistance to Cuba will require a  number of improvements, including better communication between State  and USAID regarding day-to-day activities, particularly in Cuba. In  addition, a number of the basic elements required for effective grant  management and oversight need to be strengthened. These include  ensuring that effective preaward reviews are performed, strengthening  internal controls at the grantee level, and identifying and monitoring at- risk grantees. Further, agency officials need to inform and, as needed,  train grantees about their shared responsibilities in collecting information  that will permit better monitoring and evaluation of program outcomes.  Ultimately, better program oversight can help to assure that resources are  responsibly and effectively utilized and grantees are in compliance with  applicable laws and regulations.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of State and the USAID Administrator  work jointly to improve communication among State bureaus in  Washington, D.C.; USINT in Cuba; and USAID offices responsible for  implementing U.S. democracy assistance, recognizing that USINT has  limited resources but a crucial role in providing and monitoring  democracy assistance.
We also recommend that the USAID Administrator direct the appropriate  bureaus and offices to improve management of grants related to Cuba by  taking the following actions:  Improving the timeliness of preaward reviews to ensure they are  completed prior to the awarding of funds.
Improving the timeliness and scope of follow-up procedures to assist in  tracking and resolving issues identified during the preaward reviews.
Requiring that grantees establish and maintain adequate internal control  frameworks, including developing approved implementation plans for the  grants.
Providing grantees specific guidance on permitted types of humanitarian  assistance and cost-sharing, and ensuring that USAID staff monitors  grantee expenditures for these items.
Developing and implementing a formal and structured approach to  conducting site visits and other grant monitoring activities, and utilizing  these activities to provide grantees with guidance and monitoring.
section_title: Agency Comments and Our Evaluation
paragraphs: We received comments from State and USAID, which are reprinted in  appendixes II and III, respectively. State and USAID appreciated the  professionalism with which we conducted our review and were gratified  that we were able to report that dissidents in Cuba appreciated U.S.  democracy assistance, and found this assistance to be useful in their work.  In response to our recommendation, State said that, consistent with the  Secretary of State’s recent foreign assistance reforms, it was taking steps  to improve interagency communication and coordination for Cuba  democracy assistance. These steps included providing USAID officials  regular access to classified communications with USINT in Havana and  State, and implementing regular meetings between DRL, the Bureau of  Western Hemisphere Affairs’ Office of Cuban Affairs, the Office of the  Cuba Transition Coordinator, and USAID. State also commented that— within the constraints imposed by implementing a democracy-building  program in Cuba—DRL and the Office of Cuban Affairs would work  closely with all grantees to identify creative ways to document the impact  of Cuba programs. These new methods of documentation would attempt  to measure impact beyond direct outputs (e.g., items delivered or persons  trained).
USAID said it was taking actions to improve its performance in managing,  monitoring, and evaluating democracy assistance for Cuba. These actions  would include better documentation of USAID grantee monitoring,  improved interagency communications, and a review of all aspects of the  USAID procurement system as it relates to the Cuba program. Subsequent  to submitting its written comments, USAID offered additional comments  regarding our recommendations. USAID concurred with our first, second,  third, and fifth recommendations, as well as with the part of our fourth  recommendation that USAID should ensure that its staff monitors grantee  expenditures. USAID concurred, in part, with our recommendation to  provide grantees specific guidance on permitted types of humanitarian  assistance and cost-sharing. To avoid potentially making grant documents  unwieldy and difficult to use, USAID plans to continue to reference  additional regulatory material regarding allowable costs and other matters  in its grants. However, USAID will review its standard grant provisions to  ensure that grantees are provided clear guidance regarding how to access  referenced regulatory materials. USAID also is considering providing  technical assistance for grants management and grant and regulatory  documents to Cuba program grantees in Spanish.
State and USAID provided technical comments on a draft of this report,  which we have incorporated where appropriate. In its technical  comments, USAID raised some issues regarding some of our findings.  However, we have worked with agency officials to resolve or clarify these  matters.
We will send copies of this report to the Secretary of State, the USAID  Administrator, appropriate congressional committees, and other interested  parties. Copies will be made available to others upon request. In addition,  this report will be made available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  David Gootnick at (202) 512-4128 or gootnickd@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines (1) the roles and objectives of the agencies  implementing U.S. democracy assistance targeted at Cuba and the  characteristics and selection of the grantees receiving Department of  State (State) and U.S. Agency for International Development (USAID)  awards; (2) the types, amounts, beneficiaries, and methods used to deliver  assistance for selected grantees in 2005; (3) USAID’s monitoring and  oversight of these grantees; and (4) the availability of data to evaluate  whether U.S. assistance has achieved its goals.
During our review, we conducted fieldwork at USAID, State, and the  Departments of Treasury (Treasury) and Commerce (Commerce) in  Washington, D.C.; we also conducted work at the offices of selected  grantees in Washington, D.C., and Miami, Florida. At these locations, we  analyzed key records and interviewed agency officials and grantees to  obtain an understanding of the processes used to select grantees, monitor  their performance, assess the disbursement of funds, and evaluate project  results. We also discussed Cuba democracy assistance with officials at the  National Endowment for Democracy and the Council on Foreign Relations  in Washington, D.C.
We conducted fieldwork at the U.S. Interests Section (USINT) in Havana,  Cuba, from late June–early July 2006, where we interviewed relevant U.S.  government officials and observed their activities, such as sorting,  delivering, and monitoring assistance. We interviewed several leading  dissidents and human rights activists—including independent librarians  and journalists—and family members of political prisoners. We also  interviewed foreign-embassy officials.
We conducted our work from August 2005 through September 2006 in  accordance with generally accepted government auditing standards.
To identify the roles and objectives of the implementing agencies, we  analyzed (1) U.S. laws authorizing democracy assistance to Cuba and  related records, such as agency officials’ statements and committee  reports; (2) State and USAID policy and strategy records, such as agency  strategic and performance plans, budget requests, and bureau and mission  performance plans; and (3) the two reports of the Commission for  Assistance to a Free Cuba and related records. We also interviewed  USAID, Treasury, Commerce, and State officials (including State’s Cuba  Transition Coordinator) about the objectives and roles of their agencies in  providing assistance to Cuba.
To examine the characteristics and selection of the grantees that received  State or USAID awards in 1996–2005, we reviewed key grantee and agency  records including annual reports, proposals, and Web sites for the 34  organizations that received State or USAID awards during that period; and  the grants and cooperative agreements, agreement modifications, and  related agency records for the 44 awards State and USAID made during  that period. We analyzed this information to determine (1) the types and  location of organizations that received awards; (2) whether these  organizations had previously worked on democracy promotion activities;  (3) the methods State and USAID used to identify and evaluate assistance  proposals; and (4) selected characteristics of the awards, such as their  initial amount and length, cost-sharing requirements, and any postaward  modifications.
To identify the types and amounts of assistance provided by grantees,  beneficiaries of this assistance, and grantees’ delivery methods, we  selected a judgmental sample of 10 grantees with active awards in 2005  (see table 9). These 10 grantees were implementing 14 grants or  cooperative agreements in 2005 with a total estimated budget of nearly  $52 million. In selecting the grantees, we considered a range of factors to  ensure our sample included a mix of large, medium, and small awards;  included a mix of types of nongovernmental organizations (NGO); and  covered the range of U.S. democracy assistance targeted at Cuba. We  focused our detailed analysis on USAID’s grantees and agreements  because State’s grants were not awarded until mid-2005. We also  considered the length of time grantees had been providing U.S. democracy  assistance for Cuba to ensure grantees had several years experience  working with USAID. The resulting sample accounts for over 76 percent  of the State and USAID awards active in 2005 for U.S. democracy  assistance targeted at Cuba.
To identify these organizations’ program objectives, we analyzed grantee  proposals, grants or cooperative agreements, internal authorization  memorandums, and modification of assistance forms. We obtained  grantees’ quarterly narrative and financial reports to USAID to identify  grantees’ reported activities and to quantify the types and amounts of  assistance these grantees reported sending to Cuba. To corroborate these  data and to develop an understanding of grantees’ delivery methods, we  interviewed representatives of these organizations in Washington, D.C.,  and Miami and, when possible, observed their activities. We also reviewed  internal documents provided by these grantees, including procedures  manuals, tracking databases and reports, and other records.
We developed an electronic database to track and analyze selected terms  of the agreements in our sample, including objectives, award amounts and  dates, cost-sharing amounts, modifications, sub-grant agreements, and  reported activities. To test the general reliability of quantities of assistance  recorded for our sample, we compared these data with other documents  provided by grantees (e.g., shipment logs, tracking databases, and internal  reports), documents submitted by USAID, and data provided by USINT.  We also used interviews with grantee representatives to corroborate these  data. Based on these general comparisons, we determined grantees’  records were sufficiently reliable for the purposes of this report.
To identify the types and amounts of assistance provided by grantees in  our sample, we used our electronic database to track and summarize  grantees’ individual activities, which we then used to categorize assistance  types and amounts. In addition, we interviewed representatives of the  grantees in our sample and select beneficiaries in Havana about their  experiences.
To assess USAID’s management and internal control for monitoring  grantees, we reviewed grants and cooperative agreements, interviewed  agency officials and select grantees, reviewed USAID and grantee policies  and procedure manuals, performed walk-throughs of grantee  disbursement processes, and reviewed grantee invoices and supporting  documentation. For 10 grantees, we reviewed the internal controls and  related residual fiscal accountability risk. Based on our initial reviews, we  performed additional expenditure testing for 3 grantees that appeared to  have poor control environments. To assess grantees’ potential fiscal  accountability residual risk, we reviewed the adequacy of their internal  controls according to the criteria contained in our Standards for Internal  Control in the Federal Government. Our procedures did not specifically  address whether grantees were complying with federal laws and  regulations. However, grantees expending more than $500,000 in federal  funds annually are subject to the Single Audit Act. Under this act, these  grantees must receive an annual audit, which includes determining  whether the grantee has complied with laws, regulations, and the  provisions of contracts or grant agreements that may have a direct and  material effect on each of its major programs. We focused our detailed  analysis on USAID’s grant oversight and did not perform similar detailed  analysis of State’s grant oversight because State’s grants were not awarded  until mid-2005.
We performed a detailed review of 5 of 14 grant agreements in our sample.  We selected these agreements because they represented the range of Cuba  program objectives outlined and were signed over an 8-year period  between 1997 and 2005. A USAID official confirmed that all grant and  cooperative agreements use standard language from document-generating  software. The standard language is modified periodically under the  direction of the USAID’s Office of Acquisition and Assistance.
To assess the monitoring and reporting of program performance  information evaluation, we examined USAID, Office of Management and  Budget, and other federal government policies and guidance. We also  reviewed our previous reports and expert panel reports on grant  accountability to identify lessons learned. To better understand the  challenges of evaluating democracy assistance, we reviewed relevant  literature. We also analyzed USAID Cuba program documents, grantee  agreements, and modifications to identify guidance provided on reporting  performance data. We also analyzed grantee quarterly reports to identify  how they reported program achievements. We also assessed evaluations of  U.S. assistance to Cuba, such as one grantee’s evaluation of some  independent NGOs, the PricewaterhouseCoopers evaluation of the USAID  Cuba program, and associated program documents.
We interviewed USAID Cuba program officials concerning their current  and past program evaluation practices; program grantees in Miami and  Washington, D.C., to identify the instructions and feedback they have  received concerning program reporting and evaluation; USINT officials  concerning their role in monitoring and reporting program performance  information; and beneficiaries in Cuba about their views of the  effectiveness of the U.S. democracy assistance they had received. We  focused our detailed analysis on USAID’s program effectiveness because  State’s grants were not awarded until mid-2005.
Both State and USAID officials provided sensitivity reviews of a draft of  this report, and we followed their direction in removing potentially  sensitive or classified information.
section_title: Appendix II: Comments from the Department of State
section_title: Appendix III: Comments from the U.S. Agency for International Development
section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Phillip Herr, Michael Rohrback,  Bonnie Derby, Elizabeth Guran, Keith H. Kronin, Todd M. Anderson, Cara  Bauer, Lynn Cothern, and Reid Lowe made key contributions to this  report. Ernie Jackson, Lauren S. Fassler, and Arthur L. James, Jr., provided  technical assistance.