Egypt: U.S. Government Should Examine Options for Using Unobligated Funds and Evaluating Security Assistance Programs
Published: 2015-02-11T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since the signing of the Egypt-Israel Peace Treaty in 1979, Egypt has been a key strategic partner of the United States and the recipient of almost $64 billion in U.S. security and economic assistance, including an annual average of about $1.3 billion in security assistance and $245 million in economic assistance since fiscal year 2009. State outlines strategic objectives for Egypt, State and USAID are primarily responsible for funding and managing assistance provided to Egypt, and the Department of Defense implements most security assistance. Since the January 2011 revolution that ended the almost 30-year presidency of Hosni Mubarak, Egypt has experienced a series of tumultuous political transitions that have raised concerns about how U.S. assistance is supporting strategic objectives.
This report examines, for fiscal years 2009 through 2014, the extent to which (1) U.S. strategic objectives and assistance evolved, (2) the U.S. government disbursed funds allocated for assistance to Egypt, and (3) the U.S. government evaluated the results of its assistance. To address these objectives, GAO analyzed U.S. government documents; interviewed U.S. officials in Washington, D.C.; and conducted fieldwork in Cairo, Egypt.
section_title: What GAO Found
paragraphs: U.S. strategic objectives and levels of assistance to Egypt have generally remained constant since fiscal year 2009, though the U.S. government adjusted some aspects of its assistance in response to events in Egypt. According to documents and senior U.S. officials, U.S. strategic objectives are to assist Egypt to be stable, democratic, and prosperous; uphold the peace treaty with Israel and advance regional stability; counter terrorism and extremism; and continue to provide strategic benefits to the U.S. government. After Egypt's 2011 revolution, the U.S. government increased its emphasis on democracy and economic growth initiatives. After President Morsi's removal in July 2013, the U.S. government suspended some assistance and adjusted its economic assistance to focus more on directly benefitting the Egyptian people and its security assistance to focus more on shared interests. The administration has now resumed some assistance, enabled in part by new legal authorities provided by Congress.
As of September 30, 2014, the U.S. government had disbursed or committed almost $7.5 billion (about 80 percent) of over $9.3 billion in assistance allocated for Egypt in fiscal years 2009 through 2014. The U.S. government allocated 98 percent of this funding from the Foreign Military Financing and Economic Support Fund (ESF) accounts. The Department of State (State) and the U.S. Agency for International Development (USAID) reported $460 million in unobligated ESF balances for Egypt—equal to about 230 percent of their fiscal year 2015 budget request of $200 million. This included $260 million in prior year funding allocated for a cash transfer to Egypt that the administration announced in October 2013 that it would not carry out. According to U.S. officials, these funds have not been reprogrammed for other purposes. Given U.S. government resource constraints, it is important that U.S. agencies have plans for using existing resources.
While USAID has evaluated some economic assistance, State has not evaluated the results of billions of dollars in security assistance to Egypt. Since fiscal year 2009, USAID has evaluated 15 projects in Egypt totaling over $600 million and has completed all of the evaluations required under its policy. USAID officials noted that they have used evaluations to inform decisions about assistance. In May 2014, State attempted to commission a first-ever evaluation of results of security assistance to Egypt but received no proposals in response to its solicitation. State officials said that the agency remains committed to completing such an evaluation and is considering alternate approaches, although State has not established specific time frames for doing so. Standard practices in program management include a plan to execute projects within a specific time frame.
section_title: What GAO Recommends
paragraphs: GAO recommends that (1) State and USAID develop a plan for other uses for $260 million previously allocated for a cash transfer and (2) State establish specific time frames for completing a required evaluation of security assistance. State and USAID generally agreed with these recommendations.

section_title: Letter
paragraphs: For over 30 years, Egypt has been a key military and political ally of the  United States and among the top recipients of U.S. foreign assistance.  Since the signing of the Egypt-Israel Peace Treaty in 1979, the United  States has provided Egypt with approximately $64 billion in assistance,  including about $40 billion in security assistance and $24 billion in  economic assistance. Through security assistance programs  administered by the Departments of State (State) and Defense (DOD),  the United States has provided the Egyptian military and law enforcement  agencies with training and equipment. Through economic assistance  programs primarily administered by the U.S. Agency for International  Development (USAID), the United States has funded education,  economic growth, health, and democracy and governance programs in  Egypt. According to U.S. officials, the U.S.-Egypt strategic partnership is  based on shared interests of promoting a stable and prosperous Egypt,  securing regional peace and maintaining peace between Egypt and  Israel, and countering violent extremism throughout the region. U.S.  officials also cite significant benefits associated with the strategic  partnership, including expedited transit through the Suez Canal, approval  of military overflights, and cooperation on counterterrorism and  counterproliferation efforts.
Following almost 30 years of relative stability, Egypt has experienced a  series of tumultuous political transitions since 2011 that have generated  concerns among some members of Congress about how U.S. assistance  is being used to meet strategic objectives. In January 2011, a popular  revolution ended the presidency of Hosni Mubarak and ushered in a  period of transitional military rule. In June 2012, Mohamed Morsi of the  Muslim Brotherhood-affiliated Freedom and Justice Party took office as  Egypt’s first democratically elected president, but a little over a year later  the Egyptian military removed Morsi from power after a popular uprising  against his presidency. In the aftermath of Morsi’s removal, the U.S.  government suspended some assistance to Egypt. In May 2014,  Abdelfattah al-Sisi, a former field marshal in the Egyptian Armed Forces  who played a key role in Morsi’s removal, was elected president.
You asked us to review various aspects of U.S. assistance to Egypt. This  report examines, for fiscal years 2009 through 2014, the extent to which  (1) U.S. strategic objectives and assistance for Egypt evolved, (2) the  U.S. government disbursed funds allocated for assistance to Egypt, and  (3) the U.S. government evaluated the results of its assistance.
This report focuses on agency efforts to complete evaluations, which is distinct from  performance measurement. Performance measurement is the ongoing monitoring and  reporting of program accomplishments, particularly progress toward preestablished goals,  and is typically conducted by program or agency management. strategic objectives for Egypt. State confirmed that the U.S. objectives for  assistance to Egypt are consistent with U.S. policy developed by the  National Security Council. We conducted audit work in Cairo, Egypt, and  interviewed Egyptian government officials from the Ministries of Foreign  Affairs, International Cooperation, and Social Solidarity—three ministries  that coordinate bilateral assistance with the United States or approve the  registration of a portion of the organizations that implement U.S.-funded  assistance. We also met with officials from the Egyptian Armament  Authority, a unit within the Egyptian Armed Forces that oversees the  procurement of U.S. military equipment using U.S. assistance. In both the  United States and in Cairo we also interviewed officials from  nongovernmental organizations that implement U.S. assistance to Egypt.  Appendix I provides a detailed description of our scope and methodology.
We conducted this performance audit from November 2013 to February  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Overview of Egypt
paragraphs: Egypt is the most populous country in the Arab world and is strategically  located at the geographic nexus between Africa and the Middle East (see  fig. 1). It is bordered to the north by the Mediterranean Sea; to the west  by Libya; to the south by Sudan; and to the east by the Gaza Strip, Israel,  and the Red Sea. Egypt controls the Suez Canal, a strategic maritime  linkage between the Mediterranean Sea and Indian Ocean by way of the  Red Sea.
The United States helped broker the Egypt-Israel Peace Treaty in 1979  and since then has regarded Egypt as a key strategic partner on a range  of security issues, including maintaining peace in the Middle East and  countering terrorism and violent extremism. For example, Egypt played a  key role in mediating negotiations between Israel and Hamas during their  2014 conflict. Egypt has also undertaken a number of security operations  in recent years to restore law and order in the Sinai Peninsula and to  combat terrorist organizations that have used the peninsula as a base of  operations to conduct attacks in Egypt and Israel. In addition, Egypt  joined the U.S. coalition against the Islamic State of Iraq and the Levant  in September 2014.
section_title: Egypt’s Economic Outlook
paragraphs: Egypt has faced a number of economic challenges in recent years,  including persistently high unemployment, growing public debt,  unsustainable subsidies on food and fuel, and declining revenues in key  sectors, such as tourism. According to a 2014 International Monetary  Fund report, political and social tensions continue to depress economic   For example, real gross domestic product and private  activity in Egypt.investment growth remained weak; inflation remained high (consumer  price inflation was estimated to be 10.7 percent from 2013 to 2014); and  the poverty rate increased to 26.3 percent. Furthermore, while  improvements in Egypt’s political environment have boosted the World  Bank’s assessments of the country’s economic outlook, in 2014 the World  Bank noted that some measures of Egypt’s economic performance, such  as foreign direct investment and international reserves, remain well below  their pre-revolutionary levels. The World Bank also noted that Egypt  suffered from weak performance in indicators of government  transparency and accountability, earned a low ranking (114 out of 177  countries) in an index of global corruption, and ranked close to the bottom  in the World Bank’s 2013 Ease of Doing Business index. In the years  leading up to the January 2011 revolution, the Egyptian government  initiated work on a number of economic reform initiatives, including tariff  reductions, privatization of state-owned enterprises, and the easing of  regulations on the private sector, according to U.S. government  documents; however, reform initiatives have stalled since that time. More  recently, since taking office in June 2014, President al-Sisi has started  work on several economic initiatives, including cutting fuel subsidies and  launching major infrastructure projects such as an expansion of the Suez  Canal. Since the January 2011 revolution, other countries in the region,  including Saudi Arabia, Kuwait, and the United Arab Emirates, have  provided billions of dollars in economic assistance to Egypt.
After a long period of relative political stability, Egypt has experienced a  series of tumultuous political transitions in recent years. Following the  assassination of President Anwar el-Sadat in October 1981, Hosni  Mubarak assumed power in Egypt and ruled for almost 30 years until  2011. Starting on January 25, 2011, Egyptian citizens took to the streets  to protest against President Mubarak and to demand a variety of political,  economic, and social reforms. These protests followed shortly after and  were inspired in part by the successful revolution in Tunisia that began in  December 2010. The protests in Egypt culminated in President Mubarak’s  resignation on February 11, 2011. Since that time, Egypt has continued to  undergo a series of turbulent political transitions. After a transitional  period of military rule following President Mubarak’s resignation,  Mohamed Morsi of the Muslim Brotherhood-affiliated Freedom and  Justice Party became Egypt’s first democratically elected president in  June 2012. However, in July 2013, the Egyptian military removed Morsi  from power after widespread citizen protests against his rule. After  Morsi’s removal, the military appointed the chief justice of Egypt’s  Supreme Constitutional Court, Adli Mansour, to serve as interim  president. Former field marshal Abdelfattah al-Sisi resigned from the  Egyptian army and was subsequently elected as president in May 2014.  In January 2015, the Egyptian government announced that parliamentary  elections would take place in two phases, with the first slated for March  22 and 23 and the second for April 26 and 27, 2015.
At various points since the January 2011 revolution, Egyptian government  officials have reiterated their commitment to Egypt’s democratic transition,  but the Egyptian government has also taken a number of actions that  have caused some observers to question its commitment to democratic  ideals. For example, the Egyptian government has conducted an  aggressive campaign against supporters of former President Morsi,  including one incident on August 14, 2013, when Egyptian security forces  killed at least 817 Morsi supporters in Raba’a Square, according to a  report by Human Rights Watch. Additionally, in June 2013, an Egyptian  court convicted employees of four U.S. nongovernmental organizations  on charges related to their implementation of U.S. government-funded  democracy and governance assistance programs. The Egyptian  government has also taken other steps to curb press freedom and limit  political dissent, according to U.S. government, international organization,  and nongovernmental organization reporting. For example, in June 2014,  an Egyptian court sentenced three Al Jazeera journalists to multiyear  sentences on charges of producing misleading news coverage and  supporting the Muslim Brotherhood. Figure 2 provides a timeline of key  events in Egypt’s political transitions.
section_title: U.S. Assistance Programs for Egypt
paragraphs: Since 1979, when the Egypt-Israel peace treaty was signed, Egypt has  been among the top recipients of U.S. foreign assistance. Historically, the  U.S. government has provided Egypt with both security and economic  assistance. The United States has provided Egypt with almost $64 billion  in assistance since 1979, including about $40 billion in security  assistance and $24 billion in economic assistance. While U.S. funding for  security assistance to Egypt has stayed generally constant since the  1980s, economic assistance has declined significantly since that time.
The U.S. government provides bilateral assistance to Egypt through a  number of accounts, which are described in table 1. In addition to its  bilateral assistance, the U.S. government has also provided assistance to  Egypt through a number of accounts that fund global or regional  programs, including the Nonproliferation and Disarmament Fund, the  Democracy Fund, and the Global Health Program.
The U.S. government provides the majority of its security assistance to  Egypt through the Foreign Military Financing (FMF) account. Egypt has  used FMF funding to purchase and sustain a wide array of military  systems, including major systems such as F-16 aircraft, Apache  helicopters, and M1A1 tanks, as shown in figure 3.
The U.S. government provides the majority of its economic assistance for  Egypt through the Economic Support Fund (ESF) account. The U.S.  government has used ESF assistance to fund economic development,  health, education, and democracy and governance programs in Egypt.  Appendix II provides examples of activities that the U.S. government has  funded with ESF in each of these areas. The U.S. government funds most  ESF programming in coordination with the Egyptian government under  assistance implementation agreements, according to USAID and State  officials. The U.S. government also uses the ESF account to directly  fund nongovernmental organizations and other organizations to  implement activities in Egypt outside of the framework of an assistance  implementation agreement, including democracy and governance  activities.
The U.S. government has used assistance from other accounts to fund a  range of other activities. For example, the U.S. government has used  International Military Education and Training (IMET) funding to provide  training to Egyptian military personnel on U.S. military doctrine and  values, International Narcotics Control and Law Enforcement (INCLE)  funding to train the Egyptian police on forensic investigative techniques  and community policing models, and Nonproliferation, Anti-terrorism,  Demining, and Related Programs (NADR) funding to expand cooperation  with the Egyptian government related to efforts to target and disrupt  international terrorism and weapons smuggling groups.
section_title: U.S. Government Has Generally Maintained the Same Strategic Objectives and Overall Levels of Assistance for Egypt since Fiscal Year 2009
paragraphs: U.S. strategic objectives for Egypt have generally remained constant  since fiscal year 2009. The U.S. government’s overall levels of security  and economic assistance to Egypt have also generally remained constant  from fiscal years 2009 through 2014. While U.S. strategic objectives and  overall levels of assistance generally did not change during this period,  the U.S. government did increase its focus on particular objectives and  adjusted some aspects of its assistance in response to Egypt’s political  transitions. After the revolution in January 2011, the U.S. government  adjusted its assistance to place more emphasis on democracy and  governance and economic growth initiatives. After the removal of  President Morsi, the U.S. government adjusted its assistance again by  suspending some assistance, including holding the delivery of several  large military systems, and focusing its economic assistance more on  programs that directly benefit the Egyptian people and its security  assistance more on shared interests. According to U.S. government  officials, this policy remains in place, but some previously suspended  assistance to Egypt has resumed, enabled in part by the passage of the  Consolidated Appropriations Act, 2014, which provided additional  authority for and restrictions on U.S. assistance to Egypt.
subsections: section_title: U.S. Government’s Strategic Objectives for Egypt Have Generally Remained Constant since Fiscal Year 2009
paragraphs: U.S. strategic objectives for Egypt have generally remained constant  since fiscal year 2009, according to senior U.S. officials and State  documents. objectives for Egypt:   State officials identified the following as U.S. strategic
Egypt is stable, democratic, and prosperous.
Egypt upholds the peace treaty with Israel and is a partner for regional  stability.
State confirmed that the U.S. objectives for assistance to Egypt are consistent with U.S.  policy developed by the National Security Council.
Egypt helps counter terrorism and violent extremism.
Egypt continues to provide strategic benefits to the United States,  including expedited access through the Suez Canal and approval of  military overflights.
We found these objectives to generally be consistent with those  contained in various U.S. government documents and senior  administration officials’ statements. According to State officials, strategic  objectives for Egypt can be found in several different documents: mission  strategic plans and resource requests, congressional budget  justifications, presidential speeches, and congressional testimony by  senior administration officials. We analyzed the mission strategic plans  and resource requests for Egypt, as well as the congressional budget  justifications for fiscal years 2009 through 2015, and presidential  speeches and congressional testimony. We found that the objectives in  these documents were generally consistent with statements made by  State officials and remained largely constant in fiscal years 2009 through  2015.
In September 2014, State began a planning process to review its  strategic objectives for Egypt as part of the development of its integrated   According to State guidance, this strategy is intended  country strategy.to encapsulate policy priorities and objectives, as well as the means by  which diplomatic engagement, foreign assistance, and other tools will be  used to achieve them. The integrated country strategy, once it has been  finalized, will serve as the basis for future resource requests and  performance reporting, according to State guidance. To guide its efforts in  Egypt prior to beginning work on the integrated country strategy, State  used annual mission strategic plans in fiscal years 2009 through 2013  and mission resource requests for fiscal years 2014 and 2015. State  officials told us that U.S. Embassy Cairo plans to have an integrated  country strategy in place by February 2015 in order to inform the  mission’s budget planning process for fiscal year 2017.
section_title: U.S. Government Has Generally Maintained the Same Overall Levels of Assistance for Egypt since Fiscal Year 2009
paragraphs: U.S. assistance to Egypt generally remained constant in fiscal years 2009  through 2014. State and USAID allocated more than $9.3 billion in  security and economic assistance to Egypt over this period, averaging  about $1.55 billion in annual allocations for assistance to Egypt.  Allocations ranged from a high of about $1.61 billion in fiscal year 2010 to  a low of about $1.49 billion in fiscal year 2013. The majority of this  funding—approximately 84 percent—supported security assistance, while  16 percent supported economic assistance. As shown in figure 4, the  shares of U.S. assistance allocated to security and economic assistance  to Egypt largely remained constant in fiscal years 2009 through 2014.
section_title: After Egypt’s 2011 Revolution, U.S. Government Increased Its Focus on Economic Growth and Democracy and Governance Initiatives
paragraphs: Though overall U.S. strategic objectives and amounts of economic  assistance to Egypt have largely remained unchanged since fiscal year  2009, the prioritization of particular economic assistance efforts, and the  amount of funding allocated for them, changed after Egypt’s January  2011 revolution. More specifically, the U.S. government adjusted its  economic assistance after the January 2011 revolution to place greater  emphasis on economic growth and democracy and governance  programs. For example, U.S. agencies increased their allocations for  economic growth programs by about 74 percent in fiscal year 2011,  compared with the average of the previous 2 fiscal years. In addition, in  fiscal year 2011, allocations for categories of assistance related to  democracy and governance constituted four of the five highest categories  of economic assistance to Egypt, whereas democracy and governance  did not rank among the five highest categories of economic assistance in  fiscal year 2009.
In February 2011, after the revolution, State and USAID reprogrammed  $150 million in prior year ESF funds in support of Egypt’s political  transition, with $100 million for job creation, poverty alleviation, and  economic development initiatives and $50 million for democracy and  governance initiatives. State and USAID allocated an additional $15  million from prior year ESF democracy funding to bring U.S. support for  democracy and governance programs in Egypt to $65 million after the  2011 revolution. State and USAID funded a variety of activities with the  $165 million in ESF funding for economic growth and democracy and  governance assistance. Economic growth activities included micro, small,  and medium-sized enterprise development and entrepreneurship; youth  employment; and community development. Democracy and governance  activities included political party strengthening, election monitoring,  independent media development, and civil society assistance, among  others. According to USAID, the U.S. government focused its assistance  in these areas in order to support Egypt’s democratic transition after the  resignation of former President Mubarak and to promote growth in the  economy. According to a USAID official, the U.S. government addressed  these objectives in tandem because officials recognized that democracy  promotion would not be successful unless accompanied by efforts to  address the economic hardships that Egyptians were experiencing and  that led, in part, to the revolution.
After the 2011 revolution, the U.S. government also announced several  new economic growth initiatives that had not been implemented, or were  only partially implemented, as of the end of fiscal year 2014. In a May  2011 speech, President Obama announced the creation of an Egyptian- American Enterprise Fund to promote the development of the Egyptian  private sector, including small and medium-sized businesses. As of the  end of fiscal year 2014, USAID had obligated $120 million to support this  fund, although the fund had not yet made any investments. In his May  2011 speech, President Obama also announced an initiative to provide  up to $1 billion to relieve some of Egypt’s debt, and an additional $1  billion in U.S.-backed loan guarantees for infrastructure projects and job  creation, but the U.S government later canceled these plans. According to  State officials, in order to be more responsive to the Egyptian  government’s immediate fiscal needs, the department decided to use a  portion of the $1 billion intended for debt relief to instead fund a $450  million cash transfer to the Egyptian government using ESF funds. The  cash transfer was intended to help close the government’s financing gap  and thus bolster Egypt’s economic stability as well as to encourage the  Egyptian government to adopt economic and budgetary reforms. In  September 2012, USAID and State notified Congress of their intent to  obligate $450 million for the cash transfer, which was to be provided in  two tranches. A congressional hold was immediately placed on these  funds, and according to USAID officials, the administration subsequently  negotiated with Congress for several months before the hold was lifted on  a portion of this funding.million in March 2013, but State announced in October 2013 that the   USAID made a first cash transfer of $190  administration would hold the delivery of a second planned transfer of  $260 million.
section_title: After President Morsi’s Removal, the Administration Decided, in October 2013, to Focus Assistance More on the Egyptian People and Shared Security Goals
paragraphs: After President Morsi’s removal, the U.S. government adjusted its  economic and security assistance. According to State officials and State  guidance, the U.S. government adjusted its economic assistance toward  programs that would more directly benefit the Egyptian people, rather  than programs that would primarily benefit the Egyptian government.  State officials also said that the U.S. government adjusted its security  assistance to better target shared U.S.-Egyptian security interests.  Following the removal of President Morsi on July 3, 2013, the  administration announced that it was conducting a review of U.S.  assistance to Egypt. This review culminated in a decision announced by  State on October 9, 2013, to adjust some economic and security  assistance to Egypt. The administration did not make a determination as  to whether President Morsi’s removal was a coup d’état. However,  according to State guidance, it adjusted its assistance to Egypt consistent  with Section 7008 of the Consolidated Appropriations Act, 2012, which  prohibits foreign assistance to the government of a country whose duly  elected head of government is deposed by military coup d’état or decree,  or a coup d’état or decree in which the military plays a decisive role.
State guidance stipulated that the government of Egypt would be defined as the  government at any level (national, regional, and local) and all branches of the government  (executive, legislative, and judicial). It stated further that departmental policy would be to  continue to provide as much assistance as possible, including assistance to the Egyptian  government, within the parameters of the policy decision and legal authorities. For  example, the guidance authorized implementing agencies to use available legal  authorities, including notwithstanding and wind-up authorities, to continue assistance to  the Egyptian government. that directly benefits Egyptian students.and USAID reported that they had obligated $119 million in fiscal year  2012 and 2013 ESF funding for this initiative to support scholarships for  women in fields such as business, science, and technology and for  disadvantaged youth, as well as partnerships between U.S. and Egyptian  universities, among other activities. In addition, senior administration  officials stated that the U.S. government would continue funding for the  Egyptian-American Enterprise Fund, which is focused on supporting  private sector development. After the October 2013 decision, USAID  began to shut down 10 projects, funded at approximately $48 million,  which provided assistance benefitting the Egyptian government, primarily  in the economic growth and education sectors. For example, USAID  began to close out $29 million in ongoing basic education projects  because they benefitted public employees and institutions. USAID also  placed funding on hold for some other planned education projects with  the Egyptian government. Furthermore, the administration held the  delivery of the second, $260 million tranche of the planned $450 million  cash transfer to the Egyptian government, and senior administration  officials noted that these funds would be used for other purposes.
After Morsi’s removal, but prior to October 2013, the administration also canceled some  security-related activities with the Egyptian military, though these were not security  assistance. In August 2013, the administration announced that a biennial U.S.-Egyptian  joint military exercise, Bright Star, had been canceled. In addition, DOD officials stated  that the U.S. government postponed an annual meeting between the U.S. and Egyptian  militaries that had been scheduled to take place in October 2013. for addressing shared security interests at that time. The administration  also asserted in its October 2013 decision that Egypt’s FMF program  would be reoriented to focus on shared security interests, including  border and maritime security, Sinai security, and counterterrorism.  According to DOD officials, prior to this decision, the U.S. government  had placed few restrictions on Egypt’s use of FMF, although the U.S.  government had been trying for several years to reorient FMF assistance  away from weapon systems designed to wage a ground war and toward  capabilities necessary for border security and counterterrorism. A State  official noted, however, that the U.S. government may continue to provide  sustainment support for some existing U.S.-origin weapon systems even  if those systems do not address one of the shared security interests. The  administration also asserted that it would continue to fund military  education and training to the Egyptian armed forces.
Subsequent to the October 2013 decision, DOD’s Defense Security  Cooperation Agency (DSCA), which implements FMF on behalf of State,  led a review of Egypt’s FMF program to align current purchases with  shared security interests and to make recommendations on whether to  continue to support specific systems through FMF. As part of this review,  DSCA identified some systems that did not directly align with shared  security interests. These included some older, outdated, or third-party- produced systems, such as Chinese-built submarines and Russian-made  surface-to-air missiles, as well as U.S.-manufactured Gulfstream VIP  aircraft and M1A1 tank kits. DSCA recommended continuing support for  18 of these systems totaling $6.5 billion, but identified 15 of these  systems totaling $777 million that should be transitioned from FMF funds  to Egyptian government funds or ended.
section_title: Some Previously Suspended Economic and Security Assistance to Egypt Has Resumed
paragraphs: With the passage of the Consolidated Appropriations Act, 2014,January 2014, Congress provided additional authority to the  administration to resume some economic and security assistance to  Egypt, while also placing restrictions, including certification requirements,  on assistance. As previously noted, while the administration did not make  a determination as to whether President Morsi’s removal was a coup  d’état, State guidance on implementing assistance in accordance with the  October 2013 decision notes that the administration decided to act  consistently with a recurring provision in State’s annual appropriations act   in  that prohibits foreign assistance to the government of a country whose  duly elected head of government is deposed by military coup d’état or  decree, or a coup d’état or decree in which the military plays a decisive  role. The Consolidated Appropriations Act, 2014, again included this  provision but enabled some assistance to resume by authorizing some  assistance for Egypt notwithstanding any provision of law restricting  assistance for Egypt. The law did, however, include certification  requirements that had to be met before some of the appropriated funding  for Egypt could be made available for certain purposes. For example, the  law specified that funds appropriated by the act that are available for  assistance for the government of Egypt could only be made available if  the Secretary of State certified to Congress that Egypt was sustaining its  strategic relationship with the United States and was meeting its  obligations under the Egypt-Israel Peace Treaty. Secretary of State Kerry  made this certification on April 22, 2014, enabling fiscal year 2014 funding  to be made available for assistance to Egypt.
As of February 3, 2015, Secretary Kerry had not yet made other  certifications under the Consolidated Appropriations Act, 2014, which  would allow certain fiscal year 2014 funds to be made available without  restriction for economic and security assistance. For example, he had not  yet certified that the government of Egypt has (1) held a constitutional  referendum and is taking steps to support a democratic transition in Egypt  or (2) held parliamentary and presidential elections, and that a newly  elected government of Egypt is taking steps to govern democratically.  Even without making these certifications, the U.S. government has been  able to continue to provide, or resume providing, some economic and  security assistance to Egypt because the law also makes exceptions for  funding in certain areas. Such funding is said to have “notwithstanding  authority” because it can be provided notwithstanding other provisions of  law that may otherwise restrict assistance to Egypt. Appendix III provides  an overview of the adjustments made to economic and security  assistance for Egypt following the October 2013 policy decision and the  enactment of the Consolidated Appropriations Act, 2014.
The Consolidated Appropriations Act, 2014, made ESF funds from this  and prior fiscal year appropriations available for education and economic  growth programs, notwithstanding any other provision of law restricting  assistance for Egypt. With the authority provided by that provision, the  U.S. government was able to resume providing some economic  assistance to Egypt that had previously been marked for termination or  put on hold. Of the 10 projects mentioned previously that USAID had  been in the process of shutting down after the October 2013 decision, 7  have now resumed. Additionally, in September 2014, USAID signed $268  million in new and amended bilateral agreements with the Egyptian  government for projects in six areas, including education, economic  growth, agriculture, and governance.
The U.S. government also has resumed some of its security assistance.  The Consolidated Appropriations Act, 2014, provides notwithstanding  authority for FMF and IMET funding appropriated in fiscal year 2014 and  prior fiscal years, but imposes certain restrictions. With regard to fiscal  year 2014 funding for FMF, State notified Congress of its intent to  obligate $650 million in FMF for Egypt a few days after Secretary Kerry  certified to Congress on April 22, 2014, that Egypt was sustaining its  strategic relationship with the United States and was meeting its  obligations under the Egypt-Israel Peace Treaty. A congressional hold  was placed on this funding because of concerns about the Egyptian  government’s abuse of the justice system. According to State officials, until December 9, 2014, $78 million of this funding was on hold, but it has  been released and all of the $650 million in fiscal year 2014 FMF is  available at the minimum rate necessary to pay existing FMF contracts or  to support activities that had security exemptions—including  counterterrorism, nonproliferation, and border security programs in Egypt,  and development activities in the Sinai. According to State officials, fiscal  year 2014 FMF funds have been used to make payments on existing  contracts, and in July 2014, State authorized DSCA to use approximately  $80 million for FMF purchases under the security exemptions. These  included spares for radars, vehicles, fixed and rotary wing aircraft, and  border security equipment, according to State officials.
The U.S. government has also removed the delivery hold for one weapon  system. In April 2014, Secretary Kerry announced that the administration  would deliver the Apache helicopters to Egypt. An administration official  noted that the Apache helicopters are being provided to the Egyptian  government to counter terrorist groups in the Sinai Peninsula. However,  the helicopters were not released to the Egyptians until August 2014.  According to State officials, new deliveries of the other three weapons  systems that were suspended as part of the October 2013 decision—F-16  aircraft, M1A1 tank kits, and Harpoon missiles—remained on hold as of  February 3, 2015.
section_title: Agencies Disbursed or Committed 80 Percent of Approximately $9.3 Billion Allocated for Egypt in Fiscal Years 2009 through 2014 but Faced Challenges Obligating Some Funds
paragraphs: State and USAID had disbursed or committed almost $7.5 billion, or 80  percent, of the approximately $9.3 billion allocated for assistance for  Egypt in fiscal years 2009 through 2014, as of the end of fiscal year 2014.  While the U.S. government allocated assistance for Egypt from a number  of accounts in fiscal years 2009 through 2014, over 98 percent of  allocated funding was from the FMF and ESF accounts. The extent to  which State and USAID had obligated and disbursed or committed funds  allocated for Egypt in fiscal years 2009 through 2014 varied by account,  with significant unobligated balances in the ESF account because of  various challenges related to Egypt’s political transitions that the agencies  faced in obligating these funds.
subsections: section_title: State and USAID Disbursed or Committed Almost $7.5 Billion of the Assistance Allocated for Egypt in Fiscal Years 2009 through 2014
paragraphs: Of the $9.3 billion in funds allocated for Egypt in fiscal years 2009 through  2014, State and USAID had disbursed or committed almost $7.5 billion,  or 80 percent, as of the end of fiscal year 2014 (see table 2).
section_title: Assistance Committed or Disbursed Varied by Account Because of Various Challenges, with Significant Unobligated Balances in ESF Account from a Previously Planned Cash Transfer
paragraphs: While U.S. agencies allocated assistance for Egypt from a number of  accounts in fiscal years 2009 through 2014, over 98 percent of allocated  funding was from two of these accounts—FMF and ESF. During this  period, U.S. agencies allocated over $7.7 billion in FMF assistance for  Egypt and over $1.4 billion in ESF assistance, or approximately 83  percent and 15 percent, respectively, of total assistance allocated for  Egypt. The remaining 2 percent of assistance allocated for Egypt included  bilateral assistance from the NADR, INCLE, and IMET accounts, as well  as several global or regional programs.
The extent to which State and USAID had obligated and disbursed or  committed funds allocated for Egypt in fiscal years 2009 through 2014  varied by account. Table 3 provides summary information on the status of  funding allocated for Egypt, by account, for fiscal years 2009 through  2014, as of the end of fiscal year 2014. Appendix IV provides more  detailed information on the status of funding for each of these accounts  for this period.
Of the over $7.7 billion in funding allocated for security assistance to  Egypt through FMF in fiscal years 2009 through 2014, State had  committed over $7 billion, or 91 percent, as of the end of fiscal year 2014  (see table 4). As of this same date, State had $728 million in unobligated  FMF balances for Egypt, all from its fiscal year 2014 appropriation, which  remains available for obligation through September 30, 2015.
Several characteristics of the FMF program have contributed to State’s  ability to obligate and commit funds for Egypt. First, annual appropriations  acts for fiscal years 2009 through 2014 have contained language stating  that FMF funds shall be obligated upon apportionment. In addition,  Egypt has certain benefits associated with its FMF assistance, including  cash flow financing, that the U.S. government has granted to only a  limited number of countries. The U.S. government has historically  provided Egypt with FMF assistance through a statutory cash flow  financing arrangement that gives Egypt the ability to agree to the  purchase of defense goods and services in a given year and then pay for  them over time, using FMF funds allocated from future appropriations.  Cash flow financing provides Egypt with the flexibility to commit to major  acquisitions in one year that will be paid for over time, similar to  installment payments.
Because of Egypt’s payment schedules on existing contracts, all of its  FMF funding for fiscal years 2009 through 2014 had been committed as  of the end of fiscal year 2014, with the exception of the $728 million in  fiscal year 2014 funding that had not been obligated. Of this $728 million  in unobligated funds, $78 million was subject to a congressional hold as  of the end of fiscal year 2014 and, thus, had not been obligated. For the  remaining $650 million, State had not yet submitted a notification to  Congress as of the end of fiscal year 2014, so those funds had not been  obligated. State is currently in the process of determining when to notify  Congress of the $650 million in FMF unobligated funds, according to  State officials. Once this $728 million has been obligated, these funds will  be committed to existing programs and potentially to a small number of  new programs in the four security exemption categories identified in the  Consolidated Appropriations Act, 2014—counterterrorism,  nonproliferation, border security, and development activities in the Sinai— according to DOD officials.
subsections: section_title: Obligation and Disbursement of ESF Account Funds
paragraphs: USAID had disbursed almost $370 million, or 26 percent, of the over $1.4  billion in funding allocated for economic assistance through the ESF  account in fiscal years 2009 through 2014, as of the end of fiscal year  2014 (see table 5).
As of the end of fiscal year 2014, USAID had approximately $460 million  in unobligated ESF balances—equal to about 230 percent of its fiscal  year 2015 ESF budget request of $200 million. Of these unobligated  funds, approximately $260 million was from appropriations prior to fiscal  year 2014. The $260 million in unobligated funds was originally allocated  for a cash transfer to the Egyptian government, but the administration  decided not to use the funds for that purpose after President Morsi’s   According to State officials, the fiscal  removal from power in July 2013.year 2011 funding allocated for a cash transfer has been transferred into  a no-year ESF account and is available for obligation until expended, and  the fiscal year 2012 funding allocated for a cash transfer has been  transferred into an extended-life ESF account and is available for  obligation until September 30, 2017.that although the administration had decided not to move forward with the  cash transfer, these funds had not been reprogrammed for other  purposes. Additionally, State and USAID officials stated that there are  currently no established time frames for making a determination regarding  how these funds will be used.
State and USAID officials stated  In addition to the unobligated balances that had been previously allocated  for a cash transfer, State and USAID have faced challenges obligating  other ESF funding allocated for Egypt. For example, USAID did not  obligate over $280 million in fiscal years 2012 and 2013 ESF funding for  Egypt until the last 2 months of fiscal year 2014. This funding would have  expired as of the end of fiscal year 2014 if it had not been obligated by  then.
State and USAID officials noted a variety of issues that have challenged  the U.S. government’s ability to obligate and disburse ESF funds.
Given the ongoing changes in Egypt’s political leadership, USAID has  experienced challenges reaching agreement with the Egyptian  government on new projects to fund, according to State and USAID  officials. For example, in one sector, USAID officials noted, they are  working with their seventh Egyptian minister since the January 2011  revolution.
State and USAID officials noted that the ordered departure of those  agencies’ personnel from Cairo, which was in effect from July to  November 2013, affected their ability during that period to conduct  their normal planning and programming processes.
State and USAID officials informed us that the security situation at  certain project locations, as well as broader security concerns across  the country, has affected their ability to obligate and disburse funds.  For example, USAID reported that technical advisors it needed for the  implementation of some of its economic growth programs refused to  travel to Egypt because of security concerns.
Policy decisions by the administration have affected the pace at which  USAID has been able to obligate and disburse ESF funds, according  to State and USAID officials. For example, the administration’s  decision to not move forward with the $260 million planned cash  transfer has required State and USAID to consider alternative plans  for this funding.
State and USAID officials stated that various congressional holds and  legal restrictions that have been placed on planned assistance to  Egypt have resulted in delays in the obligation and disbursement of  funds. For example, on May 25, 2012, USAID notified Congress of its  intent to obligate almost $27 million in fiscal year 2011 ESF funds for  a variety of programs in Egypt; however, a congressional hold was  placed on all but $500,000 of this funding, so, according to State,  USAID reprogrammed these funds.
Because of challenges in obligating and disbursing ESF funds in Egypt,  State and USAID officials have adjusted their assistance plans. For  example, USAID had to seek an extension of the period of availability for  obligation for its fiscal year 2012 ESF funds for Egypt since it determined  that it was unlikely that it would be able to obligate the funds by the end of  the original period of availability, which was September 30, 2013. In  fiscal year 2014, Congress appropriated up to $250 million in ESF funds  for Egypt consistent with the administration’s budget request for the  year;use only $200 million of this funding. In addition, the administration  requested $200 million in fiscal year 2015 ESF funding for Egypt, which  was $50 million less than its requests in fiscal years 2009 through 2014.  According to State officials, the administration requested $50 million less   however, the administration subsequently determined that it would  in funding for Egypt in part because of the large amount of unobligated and undisbursed funding already available from previous fiscal years.
section_title: Obligation and Disbursement of Funds from Other Bilateral Assistance Accounts
paragraphs: As of the end of fiscal year 2014, State had disbursed the majority of  IMET and NADR funding allocated for Egypt in fiscal years 2009 through  2014 (70 percent and 57 percent, respectively); however, it had disbursed  less than half of the funding allocated for INCLE during this same period  (47 percent). All three accounts had unobligated balances of over 20  percent of their total allocated amounts in fiscal years 2009 through 2014,  as of the end of fiscal year 2014. IMET, NADR, and INCLE had  unobligated balances that represented 21 percent, 33 percent, and 27  percent, respectively, of the total funds allocated to the accounts in fiscal  years 2009 through 2014. All of the IMET unobligated balances, as well  as the majority of the NADR and INCLE unobligated balances (63 percent  and 95 percent of the two accounts’ total unobligated balances,  respectively), were from funds allocated in fiscal year 2014 and are  available for obligation until September 30, 2015. However the NADR and  INCLE accounts also had unobligated balances that included allocated  funding going back to fiscal year 2009. State has been prohibited from obligating and disbursing fiscal year 2014 IMET funds because the  certifications contained in section 7041 of the fiscal year 2014  Consolidated Appropriations Act had not yet been made, as of February  3, 2015. State officials noted challenges in obligating and disbursing  INCLE and NADR funds that were similar to many of the challenges  experienced in obligating and disbursing ESF funds. For its fiscal year  2015 budget request, State reduced its IMET request by $100,000  compared with its fiscal year 2014 allocation, increased its request for  NADR funds by $680,000 compared with its fiscal year 2014 allocation,  and reduced its INCLE request by $2 million compared with its fiscal year  2014 allocation.
section_title: Agencies Have Evaluated Economic Assistance for Egypt but Have Not Evaluated the Results of Security Assistance
paragraphs: USAID and State have completed evaluations of U.S. economic  assistance for Egypt, but State has not evaluated the results of its  security assistance efforts. Since fiscal year 2009, USAID has completed  15 evaluations covering more than $600 million in economic assistance  and has completed all of the evaluations required under its policy.  These evaluations highlighted various achievements and challenges with  USAID-funded projects, and USAID officials noted that they have used  the results of these evaluations to inform decisions about their assistance.  State has also completed evaluations of three multicountry initiatives  funded by its Middle East Partnership Initiative (MEPI) that addressed  activities in Egypt and used the results to inform future efforts. However,  while State has undertaken efforts to commission a required evaluation of  security assistance to Egypt, it has not yet carried out the evaluation  because none of the five eligible evaluation firms submitted bids to  conduct it. Although State officials said that they remain committed to  evaluating security assistance to Egypt and are considering alternate  approaches, State has not established a time frame for completing the  required security assistance evaluation.
subsections: section_title: Agency Policies Require Periodic Evaluations of Certain Programs
paragraphs: USAID’s and State’s policies do not require an overall evaluation of all  assistance to Egypt. USAID’s and State’s policies do, however, require  periodic evaluations of large projects under agency stewardship.  Evaluations are individual or systematic studies conducted to assess how  well a program is working and are often conducted by experts external to  the program. USAID’s evaluation policy requires that each operating  unit, including USAID’s mission in Egypt, conduct at least one  evaluation of each large project it implements. According to USAID  officials, the Egypt mission calculated its threshold for large projects as  $12.2 million when it first implemented the evaluation policy in May  2011. USAID’s policy stipulates that evaluations may be undertaken for  different levels within an assistance portfolio. For example, evaluations  may cover individual projects or collections of projects that support a  higher-level objective. State’s February 2012 evaluation policy requires  that all large projects be evaluated at least once during each project’s  lifetime or every 5 years, whichever is less, and states that for most  bureaus a large project is one whose dollar value equals or exceeds the  median project size for that bureau. State’s policy also requires each  bureau to evaluate two to four projects under its direction over the 24- month period that began in fiscal year 2012, depending on the size,  scope, and complexity of the projects being evaluated and funding  availability.
State’s evaluation policy notes that the requirement for its headquarters  bureaus to evaluate two to four projects over a 24-month period was to be  extended to diplomatic posts, including U.S. Embassy Cairo, in fiscal year  2013. According to State officials, this requirement has yet to be extended  to diplomatic posts. According to State officials, State is continuing to  focus its efforts on building its capacity to conduct evaluations in  headquarters bureaus, some of which also manage assistance to Egypt.
section_title: USAID Has Completed Evaluations of Economic Assistance That It Manages in Egypt
paragraphs: USAID has completed evaluations for all of the projects that it determined  required evaluation under agency policy. USAID completed some of  these evaluations during the fiscal years included in the scope of our  review (2009-2014), whereas others were completed before fiscal year  2009 or after fiscal year 2014.
From fiscal years 2009 through 2014—the time period included in the  scope of our review—USAID completed 15 evaluations of U.S.-funded  economic assistance projects in Egypt totaling more than $600 million. As  shown in table 6, USAID evaluated projects across all four sectors of  assistance—democracy and governance, economic growth, education,  and health.
Among the 15 evaluations completed by USAID, 7 were midterm  evaluations, 7 were final evaluations, and 1 was an evaluation of USAID’s  education portfolio, which included several projects at various stages of  completion. With the exception of the evaluation of USAID’s education  portfolio, most evaluations focused on a single project. According to  USAID guidance, individual projects must contribute to USAID’s broader  development objectives for a particular country. Appendix V provides  additional information on the projects evaluated by USAID in fiscal years  2009 through 2014.
The evaluations of USAID assistance identified a range of successes  achieved and challenges experienced by USAID economic assistance  projects in Egypt, as shown by the following examples.
A December 2009 midterm evaluation of USAID’s $22 million  democracy and governance project to provide technical assistance,  training, and policy support to improve the effectiveness,  transparency, and accountability of local governments (the Egyptian  Decentralization Initiative) determined that the aggregate impact of  USAID’s efforts to decentralize governance in Egypt had been  negligible in large part because of powerful political forces in Egypt.  However, the evaluation also noted that recent efforts may have  influenced the formulation of decentralization policies by decision  makers and increased awareness of the need for decentralization,  among other things.
An April 2010 evaluation of USAID’s $250 million education portfolio  determined that USAID had made positive changes to Egyptian  education through projects that contributed to girls’ education, the use  of technology in schools, and reforms in the Egyptian Ministry of  Education. The evaluation team noted that it believed the prospects  for significant additional progress on implementation of Egypt’s  National Strategic Plan over the next 5 years were excellent and  recommended that USAID develop a new education strategy to  support continued implementation of this plan.
A September 2010 final evaluation of a $126 million project to provide  technical assistance to Egyptian ministries to define and implement  policy reforms found that the project was generally successful. The  evaluation noted that the project contributed to the implementation of  several important reform measures, which helped to improve the trade  environment, support the financial sector and economic growth,  streamline tax administration, and improve the business environment.  However, the evaluation also noted that some efforts undertaken as  part of the project—for example, studies on privatization and housing  reform—did not result in any reforms.
A February 2012 final evaluation of two USAID economic growth  projects totaling $40 million to provide technical assistance to the  institutions responsible for overseeing and managing the provision of  water and wastewater services in Egypt found that one of the projects  had helped contribute to cost-effective service delivery improvements;  however, the evaluation noted that some of the project’s  achievements seemed surprisingly modest given the long history of  similar support in this sector. The evaluation determined that the  second project had not met its dual objectives of (1) strengthening the  policy, legal, and regulatory framework for the water and wastewater  sector in Egypt and (2) improving the quality of and access to  sustainable water and wastewater services. The evaluation concluded  that the work conducted under this project may prove valuable if the  environment for reform changes in the future.
The USAID mission in Egypt considers evaluation findings and other  performance information during semiannual portfolio reviews and uses  these to inform decisions about future assistance, according to USAID  officials. For example, the evaluation of technical assistance in the water  and wastewater sectors concluded that USAID should reduce its  emphasis on capital investment planning and project management  support. As a result, USAID phased out this assistance by transferring  responsibility for such support to an Egyptian entity, according to USAID  officials. Another evaluation of a USAID project to strengthen Egypt’s  health systems recommended that future technical assistance focus on  leadership development, noting that this would be particularly important in  response to the high turnover at Egypt’s Ministry of Health and Population  in the aftermath of the January 2011 Egyptian revolution. USAID officials  reported that the mission developed two leadership development  programs to address this recommendation, one for hospital administrators  and one for nurses.
USAID officials noted that although the mission in Egypt has not yet  updated its calculation of large projects to reflect new initiatives, the  mission has already developed a planned timetable for conducting a  midterm evaluation, final evaluation, or both for all seven of the new  education, economic growth, and democracy and governance projects  totaling about $545 million that it approved in the summer of 2014 (see  app. VI). USAID plans to revise its calculation of the threshold for large  projects when the mission has an approved strategy in place to reflect  new projects and respond to recent changes in how USAID-funded  projects are designed and approved. USAID officials also noted that the  mission will calculate its threshold for large projects by development  objective to reflect revised agency guidance, which aims to ensure that  projects in each development objective are evaluated.
In addition to the evaluations described in this section, USAID officials  noted that they also use a variety of mechanisms to monitor and report on  the performance of U.S. assistance to Egypt. For example, according to  USAID officials, the mission conducts periodic reviews of its assistance  portfolio for each development objective—as well as reviews of individual  projects and activities—to monitor whether USAID-funded initiatives are  achieving their objectives.
section_title: State Has Completed Evaluations of Some Economic Assistance to Egypt
paragraphs: Officials from State’s MEPI, which funds democracy and governance  projects in Egypt and other countries in the Middle East and North Africa,  noted that since fiscal year 2009 they have completed three evaluations  of multicountry initiatives that included activities in Egypt. For example,  these officials reported that in 2011 MEPI commissioned an evaluation of  its legal reform projects, one of which was a regional civil society law  reform project that included activities in Egypt, among other countries.  MEPI officials noted that recommendations from this evaluation were  used to inform the design of a follow-on project dedicated specifically to  reforming the law governing nongovernmental organizations in Egypt.  They noted that although the proposed new law was not passed, the  project helped communicate how such a law should be formulated in  Egypt and aided Egyptian organizations in advocating for reform.
According to U.S. agency officials, the annual Performance Plan and  Report prepared by U.S. Embassy Cairo represents the most  comprehensive reporting on the entirety of U.S. security and economic  assistance to Egypt. Although not an evaluation, this report broadly  describes the successes and challenges of foreign assistance to Egypt  and measures annual progress toward selected performance indicators  that correspond to global objectives for U.S. foreign assistance (i.e.,  peace and security, governing justly and democratically, investing in  people, and economic growth).
section_title: State Has Not Completed an Evaluation of Its Security Assistance to Egypt
paragraphs: State has proposed, but has not carried out, a required evaluation of  security assistance to Egypt. State’s February 2012 evaluation policy  requires that all large projects be evaluated at least once during each  project’s lifetime or every 5 years, whichever is less, and states that for  most bureaus a large project is one whose dollar value equals or exceeds  the median project size for that bureau. According to officials in State’s  Bureau of Political-Military Affairs, which manages security assistance  through FMF, the bureau identified security assistance to Egypt as a large program in February 2013, making it subject to evaluation requirements.Accordingly, State commissioned an external evaluation of security  assistance to Egypt, including assistance provided through both FMF and   The Statement of Work for the proposed evaluation noted that  IMET.examining the impact of security assistance to Egypt was critical given  the recent transitions in the Egyptian government and the role the  Egyptian Armed Forces played in those transitions. It noted further that  that the intended purpose of the evaluation would be to (1) determine the  effectiveness of State-funded security assistance to Egypt; (2) provide  accountability for the program; and (3) identify lessons learned that would  benefit security assistance programs in Egypt, in the region, and globally.  Additionally, it specified that the evaluation should focus on the following  questions:
What impact, if any, has U.S. security assistance had on Egypt’s  capacity for satisfying U.S. strategic objectives?
Has U.S. security assistance been effective in addressing U.S.  program objectives?
Is security assistance provided by the U.S. government being used  effectively by the host government?
Were there any unintended consequences of U.S. security  assistance? Were the consequences positive or negative?
What factors explain the intended or unintended consequences of the  assistance?
What project activities should be sustained, if any?
What project activities should be expanded or contracted, if at all?
What lessons can be learned from the project experience?
State solicited proposals for this evaluation in May 2014 but did not  receive any responses from the eligible evaluation firms. According to  the State official overseeing the solicitation process, some of the eligible  firms reported having concerns about being able to carry out an  evaluation given the uncertain security environment in Egypt. State  officials also noted that the department has never before attempted to  holistically evaluate security assistance to Egypt or any other country, and  the size and complexity of security assistance to Egypt make it especially  challenging to conduct a formal evaluation. The State official overseeing  the solicitation process for the proposed evaluation noted the difficulty of  determining how security assistance contributes to broader strategic  goals and said that there is limited information to serve as the basis for an  evaluation because neither State nor DOD has established performance  metrics, nor has either agency consistently collected performance data on  the FMF program. In addition, this official noted that a foreign military  such as the Egyptian Armed Forces might be reluctant to cooperate on an  evaluation of military capabilities, as it might be perceived as intelligence  gathering.
Because of such challenges and the nonresponsiveness of eligible  evaluation firms, a State Bureau of Political-Military Affairs official  reported in October 2014 that the department had decided to take a  different approach to the evaluation. State’s Bureau of Political-Military  Affairs is in the process of developing a global security assistance  evaluation and monitoring strategy and plans to hire additional staff  members with expertise in program evaluation to develop a  methodological framework that could be applied to evaluations of security  assistance globally. One of the goals of this methodological framework  would be to clearly define the objectives of security assistance and create  a logic model linking the components of security assistance programs to  these objectives. According to the State official overseeing these efforts,  the bureau is seeking to have the new staff members in place early in  2015 to begin developing the framework. The bureau also hired a  contractor to conduct an evaluation of security assistance to Lebanon,  which it expects will help inform future evaluations of security assistance  to Egypt and other countries. According to State officials, State remains  committed to evaluating security assistance to Egypt and conducting an  evaluation as soon as practicable. However, the State official in charge of  this process noted that there are no set time frames for when this will  occur. Standard practices in program management include, among other  things, developing a plan to execute projects within a specific time  frame.
section_title: Conclusions
paragraphs: The U.S.-Egypt partnership yields significant benefits, including Egypt’s  support of peace with Israel, shared interest in counterterrorism and  regional stability goals, as well as other strategic U.S. benefits such as  expedited access through the Suez Canal and approval of military  overflights. Security and economic assistance amounting to more than  $9.3 billion since fiscal year 2009 has served as the linchpin of this long- standing strategic partnership. However, factors related to the political  upheaval in Egypt since 2011 have hindered the ability of the U.S.  government to implement some assistance. As a result, the U.S.  government has significant amounts of funding that it allocated for  assistance to Egypt but has not yet obligated for a particular purpose,  including $260 million in ESF funds allocated for a cash transfer the  administration no longer intends to carry out. Given the resource  constraints the U.S. government faces, it is important that U.S. agencies  have plans for using existing resources in an effective and timely manner.  Plans for an alternative use of the $260 million in funding allocated for the  cash transfer would allow the U.S. government to support programs  designed to respond to the evolving situation in Egypt or other identified  priorities that contribute to U.S. strategic objectives, while also potentially  allowing for reductions in future budget requests.
While the U.S. government is in the process of developing a multiyear  strategic plan to guide future U.S. assistance to Egypt, little is known  about the effectiveness of past assistance toward achieving U.S. strategic  goals. U.S. officials have acknowledged challenges in linking assistance  provided to Egypt with specific results. In particular, U.S. officials noted  that it is difficult to determine the extent to which security assistance has  contributed to strategic objectives, such as promoting regional stability,  upholding the Egypt-Israel Peace Treaty, countering terrorism and  extremism, and maintaining key strategic benefits. Nevertheless,  evaluations can provide useful information to the executive branch and  Congress about whether a program is meeting its goals or may be  producing unintended consequences. The absence of an evaluation of  security assistance to Egypt raises questions about how this program— supported by $1.3 billion in U.S. funding annually—is contributing to  meeting strategic objectives and what levels of funding are necessary for  success. State has stated its commitment to completing such an  evaluation but has not established specific time frames for doing so.  Establishing time frames for completion of an evaluation of security  assistance to Egypt would help ensure that State successfully fulfills this  commitment.
section_title: Recommendations for Executive Action
paragraphs: Given the significant unobligated balances of about $260 million in the  ESF account for Egypt previously allocated for a cash transfer that the  administration has stated it no longer intends to carry out, we recommend  that the Secretary of State and the USAID Administrator work to develop  plans for an alternate use of these funds, in consultation with the  appropriate committees of Congress. As part of planning for these funds,  State should also consider ways that this funding could potentially be  used to offset future budget requests.
To help ensure the timely completion of an evaluation of security  assistance to Egypt that is required by State policy, we recommend that  the Secretary of State establish specific time frames for completing such  an evaluation.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DOD, State, and USAID for review  and comment. DOD did not provide comments. State and USAID  provided technical comments, which we incorporated as appropriate.  State and USAID also provided written comments, which are reproduced  in appendixes VII and VIII, respectively. In their written comments, State  and USAID generally agreed with our recommendation to develop  alternate uses for $260 million previously allocated for a cash transfer and  noted that they were currently examining other uses for these funds.  Additionally, State agreed with our recommendation to establish specific  time frames for completing a required evaluation of security assistance to  Egypt. State noted that while evaluation of security assistance to Egypt  poses challenges, State views evaluation as a critical tool for  accountability and program improvement and will continue to pursue a  formal evaluation of security assistance to Egypt, or some element of  Egypt’s security assistance program.
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section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this review were to examine, for fiscal years 2009  through 2014, the extent to which (1) U.S. strategic objectives and  assistance for Egypt evolved, (2) the U.S. government disbursed funds  allocated for assistance to Egypt, and (3) the U.S. government evaluated  the results of its assistance.
To determine the extent to which U.S. strategic objectives and assistance  for Egypt have evolved since fiscal year 2009, we analyzed the  Department of State’s (State) mission strategic plans from fiscal years  2009 through 2013, mission resource requests for fiscal years 2014 and  2015, congressional testimony by senior administration officials,  presidential speeches, and congressional budget justifications for  assistance to Egypt from fiscal years 2009 through 2015. We reviewed  the U.S. Agency for International Development’s (USAID) strategies for  Egypt, including its strategic plan for fiscal years 2000-2009, bridge  strategy for fiscal years 2009 and 2010, and 2012 papers outlining  priorities for each development sector: democracy and governance,  economic growth, education, and health. We also reviewed the  Department of Defense (DOD) U.S. Central Command’s fiscal years 2014  and 2015 Country Security Cooperation Plans for Egypt. Finally, we  reviewed relevant laws pertaining to U.S. assistance to Egypt and State’s  and USAID’s guidance for strategic planning. To determine the extent to  which levels of U.S. assistance to Egypt evolved in fiscal years 2009  through 2014, we obtained and analyzed State data on allocations for  security and economic assistance to Egypt, and we reviewed cables and  memos that described changes in assistance priorities. To address  strategic objectives and changes in assistance—particularly after Egypt’s  political transitions in 2011 and 2013—we interviewed officials from  State’s Bureaus of Near Eastern Affairs; Democracy, Human Rights, and  Labor; and Political-Military Affairs; the Middle East Partnership Initiative;  and the Office of U.S. Foreign Assistance Resources; USAID’s Bureau for  the Middle East; DOD’s Office of the Under Secretary of Defense for  Policy, Defense Security Cooperation Agency, and U.S. Central  Command. State confirmed that the U.S. objectives for assistance to  Egypt are consistent with U.S. policy developed by the National Security  Council. We conducted audit work in Cairo, Egypt, and interviewed U.S.  officials from State, USAID, DOD, the Department of Homeland Security,  and the Department of Justice who manage assistance programs for  Egypt. We also interviewed Egyptian government officials from the  Ministries of Foreign Affairs, International Cooperation, and Social  Solidarity—the three ministries that coordinate bilateral assistance with  the United States or approve the registration of a portion of the  organizations that implement U.S.-funded assistance—and the Egyptian  Armament Authority, a unit within the Egyptian Armed Forces that  oversees the procurement of U.S. military equipment using U.S.  assistance. In both the United States and in Cairo we also interviewed  officials from nongovernmental organizations that implement U.S.  assistance to Egypt.
To determine the extent to which the U.S. government disbursed funds  allocated for assistance to Egypt from fiscal years 2009 through 2014, we  collected and analyzed data from State’s Office of Foreign Assistance  Resources, by appropriation account, on allocations, unobligated  balances, unliquidated obligations, and disbursements. Recognizing that  different agencies and bureaus may use slightly different accounting  terms, we provided State with definitions from GAO’s A Glossary of  Terms Used in the Federal Budget Process and requested that it provide   The data State provided  the relevant data according to those definitions.were as of the end of fiscal year 2014. State provided data on bilateral  assistance managed by both State and USAID from the Economic  Support Fund (ESF); Foreign Military Financing (FMF); International  Military Education and Training (IMET); International Narcotics Control  and Law Enforcement (INCLE); and Nonproliferation, Anti-terrorism,  Demining, and Related Assistance (NADR) accounts. In addition, State  provided data on funding from global or regional programs that supported  assistance to Egypt from the Democracy Fund, Development Assistance,  ESF, Global Health Program, and NADR accounts. In the case of FMF,  funds are budgeted and tracked in a different way than for other foreign  assistance accounts, so State provided us data on funding that was  uncommitted or committed rather than data on unliquidated obligations  and disbursements. To assess the reliability of the data provided, we  requested and reviewed information from State regarding the agency’s  underlying financial data systems and the checks, controls, and reviews  used to ensure the accuracy and reliability of the data provided. We  determined that the data State provided were sufficiently reliable for the  purposes of this report. To gather additional information on the status of  assistance to Egypt, we interviewed State, USAID, and DOD officials and  reviewed agency documents to identify factors that contributed to any  unobligated balances and unliquidated obligations. Finally, we identified  any relevant legal authorities related to these accounts, including the  periods of availability for funds to be obligated from each of these  accounts. To guide our assessment of unobligated balances and  unliquidated obligations in Egypt, we used GAO’s report Budget Issues:  Key Questions to Consider When Evaluating Balances in Federal  Accounts, which provides guidance on evaluating such balances in  federal accounts. While that prior GAO report does not make  recommendations about what level of unobligated balances and  unliquidated obligations are appropriate, it does identify key questions  that should be considered in evaluating such balances.
GAO, Performance Measurement and Evaluation: Definitions and Relationships,  GAO-11-646SP (Washington, D.C.: May 2011). documentation of the analysis USAID conducted in May 2011 to  determine which of its projects in Egypt would require evaluation. To  identify evaluations of USAID assistance, we queried USAID’s  Development Experience Clearinghouse database, downloaded relevant  evaluations, compiled a list of these evaluations, and verified the  accuracy of our list with USAID officials. We cross-referenced these  evaluations with data on USAID-funded projects in Egypt that were active  in fiscal years 2009 through July 31, 2014, to determine the value of the  projects evaluated by USAID. We determined that these data were  sufficiently reliable for the purposes of determining the value of these  projects. To identify evaluations of State assistance, we interviewed or  obtained written responses from State officials and reviewed evaluation  reports provided by State. We also reviewed a Request for Task Order  Proposal and Statement of Work issued by State in May 2014 to  commission an evaluation of security assistance to Egypt, and we  discussed the status of the proposed evaluation with officials from State’s  Bureau of Political-Military Affairs. Although the scope of our report is  limited to program evaluation, we also reviewed documents that describe,  and interviewed U.S. officials to discuss, other performance monitoring  activities undertaken by the agencies to assess the results of assistance  to Egypt.
We conducted this performance audit from November 2013 to February  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Examples of U.S. Economic Assistance Programs in Egypt
paragraphs: The U.S. government has used Economic Support Fund assistance to  fund economic growth, education, health, and democracy and  governance programs in Egypt. Table 7 provides examples of projects the  U.S. government has funded in Egypt in each of these areas.
section_title: Appendix III: Adjustments to U.S. Assistance for Egypt following the October 2013 Policy Decision and Enactment of the Consolidated Appropriations Act, 2014
paragraphs: Following the removal of President Morsi on July 3, 2013, the  administration announced that it was conducting a review of U.S.  assistance to Egypt. This review culminated in a decision announced by  the Department of State on October 9, 2013, to adjust some economic  and security assistance to Egypt. With the passage of the Consolidated  Appropriations Act, 2014, in January 2014, Congress provided additional  flexibility to the administration to resume some economic and security  assistance to Egypt, while also placing restrictions, including certification  requirements, on some assistance. Table 8 shows the adjustments to  U.S. assistance for Egypt following the October 2013 policy decision and  enactment of the Consolidated Appropriations Act, 2014.
section_title: Appendix IV: Status of U.S. Assistance for Egypt, Fiscal Years 2009-2014
paragraphs: This appendix provides additional information on the status of U.S.  assistance to Egypt, by account, for fiscal years 2009 through 2014. All  data in the appendix are as of the end of fiscal year 2014.
subsections: section_title: Status of Bilateral Assistance Account Funds
paragraphs: The U.S. government provides bilateral assistance to Egypt through a  number of accounts, including the Foreign Military Financing; Economic  Support Fund; Nonproliferation, Anti-terrorism, Demining, and Related  Programs; International Narcotics Control and Law Enforcement; and  International Military Education and Training accounts. Tables 9 through  13 provide information on the status of funds allocated for assistance for  Egypt from these bilateral accounts for fiscal years 2009 through 2014, as  of the end of fiscal year 2014.
section_title: Status of Global or Regional Assistance Program Funds
paragraphs: In addition to its bilateral assistance, the U.S. government has provided  assistance to Egypt through a number of accounts that fund global or  regional programs, including the following: Development Assistance;  Democracy Fund; Economic Support Fund; Global Health Program; and  Nonproliferation, Anti-terrorism, Demining, and Related Programs. Tables  14 through 18 provide information on the status of funds allocated for  assistance to Egypt from these accounts that fund global or regional  programs for fiscal years 2009 through 2014, as of the end of fiscal year  2014.
section_title: Appendix V: U.S. Agency for International Development Projects Evaluated for Assistance to Egypt, Fiscal Years 2009 through 2014
subsections: section_title: Project name and purpose
paragraphs: U.S. funding  awarded for  project (dollars  in millions)
1  Media Development Program. Increase the professional  standards of Egyptian print and broadcast journalism and  improve the economic viability of the media through the  strengthening of marketing and advertising capacities.
Family Justice Project. Strengthen access to justice,  enhance family stability, and protect the rights of children.
Takamol Project. Help Egypt achieve sustainable reduced  fertility and improved health outcomes for mothers and  newborns.  Egypt Financial Services Project. Promote reforms that  would allow financial institutions to offer mortgages by  removing structural, legal, and institutional constraints.
International Human Rights Law Outreach Program.  Create an enabling environment for the protection of  human rights within selected faculties of Egyptian  universities.
Egyptian Decentralization Initiative. Provide technical  assistance, training, and policy support to improve the  effectiveness, transparency, and accountability of local  government in pilot governorates so they can respond to  citizen priorities.  Education Portfolio.
Administration of Criminal Justice Program. Enhance  the capability of Egypt’s Prosecutor General’s Office  through a series of activities, including the automation of  nine public prosecution offices and the development of a  Prosecution Information Center.
Technical Assistance for Policy Reform II Project.  Provide a comprehensive and flexible source of technical  assistance to Egyptian reformers to help them define and  implement their policy reform vision.
Integrated Water Resource Management II. Increase  water efficiency and productivity, improve water quality,  and provide a more equitable allocation of water resources.  11  Agriculture Exports and Rural Incomes II, Agricultural  Technical Schools Value Chain Training. Improve the  quality of education in agricultural technical schools by  improving the learning environment, providing supervised  internship programs, and holding career skill development  competitions.
section_title: Project name and purpose
paragraphs: U.S. funding  awarded for  project (dollars  in millions)
Project  dates  —b  Sept. 2008- vulnerable communities by cultivating opportunities for girls  to practice their leadership skills, creating partnerships to  promote girls’ leadership, and enhancing knowledge to  implement and promote girls’ leadership programs.  13  Egypt Capacity Building and Policy Support in the  Water and Wastewater Sector. Provide technical  assistance to the institutions responsible for overseeing  and managing water and wastewater service provision in  Egypt and sector investment planning and implementation.  14  Avian and Pandemic Influenza Program. Produce  improved and sustainable avian and pandemic influenza  prevention and control in Egypt.  15  Egypt Health Systems 20/20 Project. Support the efforts  of Egypt’s Ministry of Health and Population to build  capacity in health sector strategic planning and financing,  social health insurance, and quality of care.
section_title: Appendix VI: Planned Evaluations for New U.S. Agency for International Development Projects in Egypt
paragraphs: Appendix VI: Planned Evaluations for New U.S.  Agency for International Development Projects  in Egypt Approved amount  for project (dollars  in millions)
section_title: Appendix VII: Comments from the Department of State
section_title: Appendix VIII: Comments from the U.S. Agency for International Development
section_title: Appendix VIII: Comments from the U.S. Appendix IX: GAO Contact and Staff Appendix VII: GAO Contact and Staff Agency for International Acknowledgments Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Jeff Phillips (Assistant Director),  Drew Lindsey (Analyst-in-Charge), Ryan Vaughan, Rachel Dunsmoor,  and Ashley Alley made key contributions to this report. Debbie Chung,  David Dayton, Kaitlan Doying, Justin Fisher, Jeff Isaacs, and Oziel  Trevino provided additional assistance.