Foreign Aid: USAID Generally Complied with Its Antiterrorism Policies and Procedures for Program Assistance for West Bank and Gaza
Published: 2016-04-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 1993, the U.S. government has committed more than $5 billion in bilateral assistance to the Palestinians in the West Bank and Gaza. Program assistance for development is a key part of the United States' commitment to a negotiated two-state solution to promote peace in the Middle East, and program funding is primarily administered by USAID.
Congress included a provision in the law for GAO to conduct an audit of all funds provided for programs in the West Bank and Gaza, including the extent to which programs comply with certain antiterrorism requirements. This report examines the extent to which (1) USAID has established antiterrorism policies and procedures for program assistance for the West Bank and Gaza and (2) USAID complied with requirements for vetting, antiterrorism certification, and mandatory provisions for program assistance for fiscal years 2012–2014.
GAO reviewed antiterrorism laws, policies, procedures, and USAID documents that pertain to assistance programs and interviewed USAID and State officials. GAO also assessed a random generalizable sample of 158 awards to USAID's implementing partners using funds provided in fiscal years 2012–2014 from the Economic Support Fund account to determine the extent to which the awards were granted in compliance with antiterrorism policies and procedures.
section_title: What GAO Found
paragraphs: In 2006, the U.S. Agency for International Development (USAID) issued key antiterrorism policies and procedures—known as Mission Order 21 (the order)—to help ensure that program assistance for the West Bank and Gaza would not inadvertently provide support to entities or individuals associated with terrorism. The order, updated in 2007, outlines requirements and procedures for (1) vetting, or investigating a person or entity for links to terrorism; (2) obtaining an antiterrorism certification from awardees; and (3) including in awards two mandatory provisions that prohibit support for terrorism and restrict funding to facilities named after terrorists. In 2008, USAID West Bank and Gaza established a post-award compliance review process to identify weaknesses in compliance with applicable requirements in the order, which USAID works to resolve. This process is a key function that allows USAID to provide reasonable assurance that all prime awards and subawards are in compliance with the order. The compliance review process is described in notices issued by the mission from 2008 to 2012. For the purposes of this report, a prime awardee is an organization that directly receives USAID funding to implement projects, while a subawardee is an organization that receives funding from prime awardees.
USAID's compliance reviews and GAO's examination of prime awards and subawards for fiscal years 2012-2014 found that USAID generally complied with requirements for vetting and inclusion of antiterrorism certification and mandatory provisions in awards. Regarding vetting, the compliance review reports—which covered more than 14,000 subawards—found, for example, one subawardee and 18 trainees for which no vetting was conducted. According to USAID, the subawardee and trainees were subsequently vetted and found eligible for program assistance. GAO's review of a random generalizable sample of 158 subawards found that 157 had applicable vetting conducted before the award. Regarding antiterrorism certification requirements, the compliance reviews identified one instance where a prime awardee failed to obtain an antiterrorism certification from a subawardee. GAO's review found that both prime awards and subawards were in compliance with antiterrorism certification requirements. Regarding mandatory provisions, the compliance reviews identified nine prime awardees that made a total of 449 subawards without including the two provisions. GAO's review found that 155 subawards (98 percent) had included the provisions in the award documentation. USAID required noncompliant awardees to provide antiterrorism certification and mandatory provisions for active awards, according to USAID.
section_title: What GAO Recommends
paragraphs: GAO is not making any recommendations in this report.

section_title: Letter
paragraphs: Since 1993, the U.S. government has committed more than $5 billion in  bilateral assistance to the Palestinians in the West Bank and Gaza.  Assistance to the Palestinians is a key part of the United States’  commitment to a negotiated two-state solution to promote peace in the  Middle East. The U.S. Agency for International Development (USAID) is  primarily responsible for administering assistance for development, which  mainly comes from the Economic Support Fund (ESF) account, for the  West Bank and Gaza. The assistance programs are bound by federal  laws, executive orders, and policies to ensure that the assistance does  not provide support to entities or individuals associated with terrorism.  USAID’s assistance generally supports programs in the areas of water  resources and infrastructure, health and humanitarian assistance,  democracy and governance, private enterprise, and education.
Congress included a provision in the law for GAO to conduct an audit of  all funds for the bilateral West Bank and Gaza program provided through  the ESF, including the extent to which the programs in the West Bank and  Gaza comply with certain antiterrorism and other requirements. In this  report, we examine the extent to which (1) USAID has established  antiterrorism policies and procedures for program assistance for the West  Bank and Gaza and (2) USAID complied with requirements for vetting,  antiterrorism certification, and mandatory provisions for program  assistance for fiscal years 2012–2014. In a recent report, we also  reviewed all uses of ESF funds for the bilateral West Bank and Gaza  Program from fiscal years 2012–2014. In recent years, we have  produced a body of work on this issue (see Related GAO Products page).
To address our objectives, we reviewed U.S. government antiterrorism  policies and procedures. We also reviewed and examined relevant  USAID records related to assistance programs, including financial and  performance audit reports conducted under the direction of the USAID  Regional Inspector General and compliance review reports issued by the  USAID West Bank and Gaza mission (hereafter referred to as the USAID  mission). We reviewed and analyzed all 47 compliance review reports  provided to us that were conducted by USAID’s compliance specialist on  24 prime awardees during fiscal years 2012, 2013, and 2014. We  analyzed these compliance review reports to assess and compile all  instances of noncompliance with USAID’s antiterrorism policies and  procedures. In addition, we interviewed cognizant USAID and State  officials in Washington, D.C., and USAID officials in Tel Aviv, Israel, and  Jerusalem. To determine whether program assistance complies with  antiterrorism policies and procedures, we examined 48 prime awards— which include contracts, grants, and cooperative agreements provided to  USAID’s implementing partners with fiscal years 2012–2014 ESF  funding—and assessed whether these awards were granted in  compliance with USAID’s antiterrorism policies and procedures. We also  examined a random generalizable sample of 158 subawards, which  included contracts and grants, and assessed the extent to which these  awards were granted in compliance with USAID’s antiterrorism policies  and procedures. For additional details about our scope and  methodology, see appendix I.
We conducted this performance audit from July 2015 to April 2016 in  accordance with generally accepted government auditing standards.  These standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings based on our audit  objectives.
subsections: section_title: Background
paragraphs: The West Bank and Gaza cover about 2,400 square miles and have a  combined population of about 4.6 million people. The West Bank has a  land area of 2,263 square miles and a population of about 2.8 million.  Gaza has a land area of 139 square miles and a population of about 1.8  million. The Palestinian Authority and Israel administer areas in the West  Bank, and the Hamas-controlled de facto authorities control Gaza (see  fig. 1). Since Hamas’ takeover of control in Gaza in June 2007, USAID  has adjusted U.S. assistance to Gaza to take into account this factional  and geographical split between Fatah and Hamas and to comply with  U.S. law and policy.
The U.S. government’s foreign assistance program in the West Bank and  Gaza is designed, among other things, to support development  assistance, provide critical infrastructure programming, and improve  security conditions on the ground while reinforcing Palestinian respect for  the rule of law. USAID’s role is to assist in building institutions for an  eventual Palestinian state that result from a comprehensive peace  agreement to promote a viable economy and to improve everyday lives of  Palestinians, according to USAID. In September 2015, we reported on the  five development sectors administered by the USAID mission from fiscal  years 2012–2014. Our analysis from that report indicated the following  information by sector:
Water resources and infrastructure. The primary objective of USAID’s  largest project in this sector is to focus on the rehabilitation and  construction of roads, schools, water, and wastewater projects.
Health and humanitarian assistance. The primary objective of  USAID’s largest project in this sector is to focus on food security,  including meeting food needs, enhancing food consumption, and  increasing the dietary diversity of the most vulnerable and food- insecure non-refugee population.
Democracy and governance. The primary objective of the largest  project in this sector is to address infrastructure recovery needs  through improvements in community infrastructure and housing,  economic recovery, and development through the creation of income  generation and business development opportunities.
Private enterprise. The primary objective of USAID’s largest project in  this sector is to strengthen the competitiveness and export potential of  at least four sectors: agriculture and agribusiness, stone and marble,  tourism, and information technology.
Education. The primary goal of USAID’s largest program in this sector  is to improve access to quality education and mitigate challenges to  youth development in marginalized areas of the West Bank.
According to USAID, since September 2015, the USAID mission has  reorganized its work along three new lines: (1) governance and civic  engagement; (2) water, energy, and trade; and (3) social services and  humanitarian assistance.
section_title: USAID Has Issued Antiterrorism Policies and Procedures for Program Assistance for the West Bank and Gaza and Developed a Key Antiterrorism Compliance Review Process
paragraphs: In March 2006, the USAID West Bank and Gaza mission approved and  issued various antiterrorism policies and procedures for program  assistance for the West Bank and Gaza in a document known as Mission  Order 21, which it last updated in October 2007. In 2008, the USAID  mission developed a key compliance review process to monitor  compliance with antiterrorism policies and procedures. This process is  reflected in formal mission notices.
subsections: section_title: In 2006, USAID West Bank and Gaza Issued Antiterrorism Policies and Procedures in Mission Order 21, Which Was Last Updated in 2007
paragraphs: In response to federal laws and executive orders prohibiting assistance to  entities or individuals associated with terrorism, in March 2006, the  USAID mission adopted a key administrative policy document known as  Mission Order 21. The stated purpose of Mission Order 21, last  amended in 2007, is to describe policies and procedures to ensure that  the mission’s program assistance does not inadvertently provide support  to entities or individuals associated with terrorism. Such procedures  include (1) vetting, (2) obtaining antiterrorism certifications, and (3)  including specific mandatory provisions in award documents. Mission  Order 21 is intended to balance development efforts in the West Bank  and Gaza with ensuring that the assistance does not benefit entities or  individuals who engage in terrorist activity, according to a senior USAID  official. The vetting requirements in Mission Order 21 apply to certain  contractors and subcontractors, recipients of grants and cooperative  agreements, trainees / students, and recipients of cash or in-kind  assistance, with some exceptions. All program awards are required to  have a reference to Mission Order 21, according to USAID.
subsections: section_title: Vetting
paragraphs: Mission Order 21 requires that certain individuals and non-U.S.  organizations undergo vetting, which involves checking their names and  other identifying information against databases and other sources to  determine if they have any identified links to terrorism. Non-U.S.  organizations are cleared by vetting their key individuals regardless of  nationality, including U.S. citizens. The vetting process provides  reasonable assurance that program assistance is “not provided to or  through any individual, private or government entity, or educational  institution that is believed to advocate, plan, sponsor, engage in, or has  engaged in, terrorist activity.” Applicable vetting is required before an  award is made or assistance is provided. Appendix II provides more  detailed information on USAID’s vetting process.
Mission Order 21 Vetting Requirements  Mission Order 21 requires USAID’s West Bank and Gaza mission to vet the following:   All non-U.S. prime awardee and subawardee organizations or individuals proposed for a contract or subcontract above $25,000.  The $25,000 threshold is cumulative for multiple awards to the same organization or individual within a rolling 12-month period.  All non-U.S. prime awardee and subawardee organizations or individuals (other than public international organizations) proposed  to receive cash or in-kind assistance under a cooperative agreement, grant, or subgrant, regardless of the dollar amount.   All non-U.S. individuals who receive USAID-financed training, study tours, or invitational travel in the United States or third  countries, regardless of the duration; or who receive training in the West Bank and Gaza lasting more than 5 consecutive work  days.   All entities or specifically identified persons who directly receive other forms of cash or in-kind assistance, with the following  exceptions (these thresholds apply to assistance per occasion):   individuals who receive jobs under employment generation activities,   individuals who receive cash or in-kind assistance of $1,000 or less,   organizations that receive cash or in-kind assistance of $2,500 or less,   households that receive micro-enterprise loans or cash or in-kind assistance of $5,000 or less, and,   vendors of goods or services acquired by USAID contractors and grantees in the ordinary course of business for their own  use.
Non-U.S. organizations are cleared by vetting their key individuals regardless of nationality, including U.S. citizens. In addition,  Mission Order 21 also provides that even if vetting would not otherwise be required under these rules, vetting will be conducted  whenever there is reason to believe that the beneficiary of assistance or the vendor of goods or services commits, attempts to commit,  advocates, facilitates, or participates in terrorist acts, or has done so in the past.
Mission Order 21 provides specific details on how vetting procedures will  be operationalized and the information implementing partners need to  provide to specific entities within the USAID mission. Attachments to  Mission Order 21 include a form that prime awardees must use to provide  the particular details necessary to conduct vetting of an individual or entity  as well as required language that must be incorporated in USAID-funded  awards for the West Bank and Gaza program.
section_title: Antiterrorism Certification
paragraphs: Mission Order 21 requires that all U.S. and non-U.S. organizations sign  an antiterrorism certification before being awarded a grant or cooperative  agreement to attest that the organization does not provide material  support or resources for terrorism. The antiterrorism certification is  generally an attachment to the award documentation that certifies, in part,  that the “recipient did not provide…and will take all reasonable steps to  ensure that it does not and will not knowingly provide material support or  resources to any individual or entity that commits, attempts to commit,  advocates, facilitates, or participates in terrorist acts.”
section_title: Mandatory Provisions
paragraphs: Mission Order 21 requires that all prime awards and subawards for  contracts, grants, and cooperative agreements contain two mandatory  provisions (which are included as clauses in award documents): a  provision prohibiting support for terrorism and a provision restricting  funding to facilities that recognize or honor an individual or entity that  commits or has committed terrorism. These two mandatory provisions  inform awardees of their legal duty to (1) “prohibit transactions with, and  the provisions of resources and support to, individuals and organizations  associated with terrorism” (antiterrorism clause) and (2) restrict  “assistance for any school, community center, or other facility named after  any person or group of persons that has advocated, sponsored, or  committed acts of terrorism” (facility naming clause). Both mandatory  clauses must be incorporated in agreements at the time of signature.
section_title: USAID Developed a Key Antiterrorism Compliance Review Process in 2008 That Is Reflected in Formal Mission Notices
subsections: section_title: USAID Developed a Key Compliance Review Process in 2008
paragraphs: In July 2008, the USAID mission established a post-award compliance  review function under the Office of Contracts Management to assess  implementing partners’ compliance with the requirements of the  antiterrorism procedures contained in Mission Order 21 when making  subawards. This function was detailed to implementing partners in a July  2008 notice issued by the USAID mission. In 2009, we reported that  USAID had enhanced its Mission Order 21 oversight efforts by hiring a  compliance specialist and implementing a new compliance review  process that provides additional assurance over contract and grant  management. These recurring, detailed reviews were developed  specifically to examine implementing partners’ subaward compliance with  Mission Order 21 in USAID’s program assistance for the West Bank and  Gaza.
Since 2009, the internal compliance review process has been an  essential control function that allows USAID to provide reasonable  assurance that all prime awardees are in compliance with all applicable  requirements when making subawards and providing funding for trainees.  The compliance specialist uses a checklist to assess implementing  partners’ subaward compliance in four categories: (1) the proper vetting  of subawardees and beneficiaries, (2) the timely incorporation of the  antiterrorism certificate, (3) the timely incorporation of applicable  mandatory provisions, and (4) monthly subaward reporting. To conduct  these compliance reviews, the compliance specialist assesses policies,  procedures, and program activities associated with an awardee,  interviews relevant implementing partners’ staff, conducts periodic site  visits, and inspects subaward documentation. The compliance specialist  produces an official compliance review report and provides feedback to  the prime awardee regarding any weaknesses in compliance identified  during the review. According to these reports, throughout the review  process the compliance specialist educates relevant prime awardee staff  members about the Mission Order 21 requirements and informally shares  best practices and suggestions with the prime awardee to help improve  compliance in the future.
In addition to identifying weaknesses in compliance, the reports also  include a general observations section documenting noncritical,  compliance-related issues identified during the review process. These  observations are organized into three categories: (1) subaward reporting,  (2) internal control over compliance with Mission Order 21, and (3) the  cross-referencing of incorporated special mandatory provisions. This  general observations section includes recommendations on how prime  awardees can improve their policies and procedures to strengthen their  compliance environment and avoid compliance-related issues in the  future.
Implementing partners are granted 2 weeks following receipt of the  compliance review report to provide a written response to explain the  reasons for any identified weaknesses in compliance and to outline the  corrective actions the prime awardee will take to mitigate them, according  to USAID. The compliance specialist follows up with the implementing  partner to ensure that responses to address any identified weaknesses in  compliance are submitted on time and to check on the sufficiency of the  corrective actions stated by the implementing partner, according to  USAID. USAID officials told us that following up to ensure that all  weaknesses in compliance have been sufficiently resolved is a key  aspect of the overall compliance review process. Failure to comply with  vetting, as outlined in Mission Order 21, may lead to disallowance of  costs incurred by the prime awardee if the organization or individual in  question is found to be ineligible to receive USAID funds, according to  USAID.
The compliance specialist, the acquisition supervisor, and the director of  the Office of Contracts Management meet with senior USAID mission  officials annually to present the outputs, analysis, and notable findings of  the compliance review cycle, according to USAID. In addition, common  issues identified during the compliance reviews are shared with the  mission’s Program Support Unit and the Resident Legal Officer so that  they can address such issues in future Mission Order 21 training sessions  for prime awardees.
section_title: Antiterrorism Compliance Review Process Is Reflected in Mission Notices
paragraphs: The compliance review function is a key control in the mission’s  assistance program because it assesses the quality of the mission’s  antiterrorism oversight over time. The compliance review process and  procedures are described in a series of stand-alone documents, such as  notices issued by the mission to implementing partners involved in  assistance programs (see fig. 2).
For example, in December 2012 the mission issued a notice to  implementing partners detailing new compliance review protocols that  expand the scope of the compliance reviews to include a better  understanding of the implementing partner’s internal controls in addition  to Mission Order 21 compliance. This and other pertinent formal notices  are posted on USAID’s West Bank and Gaza website. According to  officials in the mission, the contents of the notices and compliance with  Mission Order 21 are discussed in each program award orientation  meeting with implementing partners. No new formal notices related to the  compliance review have been issued since the end of 2012 because the  latest guidance remains effective and there have been no changes to the  process since the issuance of the latest notice, according to USAID.
USAID officials told us that they anticipate updating Mission Order 21 at  some point in the future to reflect lessons learned from implementation of  a joint USAID and State Partner Vetting System Pilot Program that vets  both U.S. and non-U.S. persons, as well as lessons learned from ongoing  vetting programs for the West Bank and Gaza, Afghanistan, and Syria  assistance. One purpose of the pilot program is to help assess the  extent to which partner vetting adds value as a risk mitigation tool, and if  so, under what circumstances vetting should occur, according to USAID.  Under the pilot program, USAID will test vetting policies and procedures,  evaluate the resources required for vetting, and seek input from  implementing partners, Congress, and other stakeholders about the  impact of vetting on USAID-funded delivery of foreign assistance. USAID  currently is implementing the pilot program in Guatemala, Kenya,  Lebanon, the Philippines, and Ukraine.
section_title: USAID Has Generally Complied with Its Requirements for Program Assistance for the West Bank and Gaza at the Prime Award and Subaward Levels
paragraphs: GAO reviewed USAID’s compliance reviews, the official reporting  documents created during the compliance review function described  above. That review and GAO’s examination of prime awards and a  generalizable sample of subawards from fiscal years 2012–2014 found  that USAID generally complied with requirements for vetting as well as  inclusion of required antiterrorism certification and mandatory provisions  in awards. Our review was based on the following documentation relating  to prime awards and subawards:
USAID’s internal compliance reviews of 24 prime awardees and the  more than 14,000 subawards that they made. The compliance  review reports USAID provided to us identified some weaknesses in  prime awardees’ compliance with all aspects of Mission Order 21  requirements when making subawards and providing funding for  trainees, including vetting, antiterrorism certification, and mandatory  provisions. However, according to USAID officials, all noncompliance  weaknesses identified in the compliance review reports for active  awards were addressed as part of the overall compliance review  process. According to USAID, prime awardees are required to amend  applicable subaward documentation to incorporate the mandatory  provisions if the subawards are ongoing and active. Prime awardees  are not required to amend documentation for subawards that have  already expired and are no longer active.
GAO’s review of 48 prime awards and a random generalizable sample  of 158 subawards associated with these prime awards, covering the  period of fiscal years 2012–2014. We found that USAID complied  with the three applicable Mission Order 21 requirements for all prime  awards we reviewed. In addition, we found that 155 of the 158  subawards reviewed in our random generalizable sample complied  with applicable Mission Order 21 requirements.
Below, we discuss in more detail the findings of each set of  documentation, in terms of vetting and inclusion of required antiterrorism  certification and mandatory provisions in awards. In addition, we discuss  an instance where the USAID mission during the course of our review  self-reported an error in vetting that was subsequently resolved.
subsections: section_title: Vetting: USAID’s Internal Compliance Reviews and GAO’s Review
paragraphs: USAID’s internal compliance review reports identified instances of  noncompliance with applicable vetting. In the universe of 14,436  subawards assessed by the compliance review reports provided by  USAID, 1 prime awardee failed to vet a subawardee. In addition, 4  prime awardees collectively failed to vet a total of 18 non-U.S.  individuals taking part in USAID-funded trainings in the West Bank  (see table 1). Specifically, one of these prime awardees did not  obtain valid vetting approval for 15 students participating in a U.S.- funded academic program. These prime awardees were required to  address all noncompliance weaknesses and obtain the proper vetting  approvals for the subawardee and all applicable trainees, according to  USAID. The compliance review reports also identified 11 prime  awardees that obtained late vetting approval, after the subawards  were signed, across 23 subawards. In addition, 3 prime awardees  conducted similar late vetting for 219 USAID-funded trainees. Most of  these instances of late vetting for trainees occurred when a single  prime awardee failed to obtain valid vetting approval for 167 non-U.S.  individuals prior to the start date of their USAID-funded academic  program. USAID’s compliance review reports identified one prime  awardee that obtained late vetting approval targeting 4 beneficiaries  of direct cash or in-kind assistance.
According to USAID, all noncompliance weaknesses in vetting  procedures identified in the compliance review reports provided to GAO  have been resolved, and there were no instances of USAID providing  funding to any individual or entity that ultimately did not pass vetting.
GAO’s review found that prime awards were in compliance and  subawards were generally in compliance with vetting requirements.  We found that 11 of the 48 prime awards we reviewed required vetting  according to Mission Order 21 because they were with non-U.S.  organizations and, if contracts, had a value of more than $25,000. Our  review of vetting information provided by USAID found that the vetting  was conducted for all 11 of these prime awardees, and eligibility  decisions were made prior to the signing of the awards, consistent  with Mission Order 21. We also found that 29 of the 91 subawards (in  our universe of 158 subawards) that went to non-U.S. organizations  had a contract value or a time and cost amendment value of more  than $25,000 and thus required vetting. Based on vetting information  provided by USAID, vetting was conducted and eligibility decisions  were made prior to the signing of the award in 28 out of the 29  instances, in compliance with Mission Order 21. However, vetting  was obtained in 1 instance after the award was signed.
section_title: Antiterrorism Certification: USAID’s Internal Compliance Reviews and GAO’s Review
paragraphs: USAID’s internal compliance review reports identified one instance of  noncompliance with antiterrorism certification requirements. The  compliance review reports identified a single instance where a prime  awardee failed to obtain an antiterrorism certificate from a  subawardee. According to USAID officials, this prime awardee was  required to amend the subaward paperwork to include the  antiterrorism certificate.
GAO’s review found that prime awards and subawards were in  compliance with antiterrorism certification requirements. We found  that 16 of the 48 prime awards were grants or cooperative  agreements and thus required a signed antiterrorism certification. All  16 prime awards contained a signed antiterrorism certification that  was signed in advance of the award. We found that 4 of the 158  subawards were grants or cooperative agreements and therefore  required an antiterrorism certification. All 4 subawards contained a  signed antiterrorism certification that was signed in advance of the  award.
section_title: Mandatory Provisions: USAID’s Internal Compliance Reviews and GAO’s Review
paragraphs: USAID’s internal compliance review reports identified noncompliance  with the two mandatory provision requirements. The reports identified  9 prime awardees that collectively made a total of 449 subawards  without the two mandatory provisions included. Specifically, the  majority of these instances were the result of a single prime awardee  failing to include the mandatory provisions in 378 of its subawards.  According to USAID officials, the 9 prime awardees were required to  amend the subaward paperwork to include the mandatory provisions if  the awards were still active.
GAO’s review found that prime awards were in compliance with the  two mandatory provisions requirements and the subawards were  generally in compliance. All 48 prime awards made by USAID  contained the mandatory provision antiterrorism clause and the facility  naming clause in the award documents. Of the 48 prime awards, 2  were made to the United Nations, which is defined as a public  international organization, and contained differently worded clauses  than for nongovernmental organizations. We found that 155 of the  158 subawards, or 98 percent, included the mandatory antiterrorism  clause and facility naming clause. Specifically, based on the  subaward documents provided by USAID, we found one instance  where the antiterrorism clause and facility naming clause were not  present in the award documentation. We also found two instances  where the facility naming clause was not included in the award  documentation. We estimate that there are 100 errors in our overall  subaward universe population of 8,744 as it relates to whether  mandatory clauses are present in the subawards.
section_title: Vetting: USAID Mission Self-Reported Case
paragraphs: During the course of our review, the USAID mission contacted us after  identifying an instance in which USAID erroneously provided funds to an  organization that did not pass vetting, but subsequently determined that  there was no indication of misuse of funds. According to the mission, the  vetting error involved a previously cleared subawardee that had a change  in a key individual in September 2014. A USAID official in the Program  Support Unit entered the new individual’s information manually into the  Partner Vetting System and in the process of cross-referencing records,  the official mistook the new key individual for a previously vetted and  cleared key individual of the organization, as these two individuals had  similar names. As a result, the vetting package submitted to the USAID  Office of Security’s Counterterrorism Branch erroneously included the  formerly cleared individual and not the new individual. In June 2015 the  subawardee resubmitted information to USAID for vetting because of  another change in key individuals. The Program Support Unit compiled  the vetting package and submitted it to the USAID Office of Security’s  Counterterrorism Branch, which then sent back an ineligibility  recommendation for one of the key individuals listed for the subawardee.  According to USAID, a review of the Partner Vetting System audit trail led  to the conclusion that in 2014 this key individual was mistaken for a  former key individual with a similar name. According to the mission, it  immediately communicated the ineligibility decision to the prime awardee,  who communicated this information to the subawardee and accordingly  did not proceed with the proposed award extension. According to mission  officials, once they became aware of the error in vetting, the mission  performed a financial assessment to determine if there was any misuse of  the U.S. government funds, which had been provided to the subawardee,  totaling about $77,000. The review concluded that adequate supporting  documents were presented for the payments, both the prime awardee  and subawardee had adhered to the terms and conditions of the  subawards when making disbursements of funds, and therefore there  was no indication of misuse. According to USAID, the mission promptly  implemented a new policy to prevent such human error from recurring  and also promptly notified both GAO and USAID’s Regional Inspector  General of the error.
section_title: Agency Comments
paragraphs: We provided a draft of this report to State and USAID for comment. State  provided no comments, and USAID provided technical comments that  were incorporated, as appropriate.
We are sending copies of this report to appropriate congressional  committees, the Administrator of USAID, and the Secretary of State. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-3149 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 key contributions to the  report are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines the extent to which (1) the U.S. Agency for  International Development (USAID) has established antiterrorism policies  and procedures for program assistance for the West Bank and Gaza and  (2) USAID complied with requirements for vetting, antiterrorism  certification, and mandatory provisions for program assistance for fiscal  years 2012–2014.
To examine the extent to which USAID has established antiterrorism  policies and procedures for program assistance for the West Bank and  Gaza, we identified and reviewed relevant legal requirements as well as  USAID policies and procedures to comply with those requirements. These  legal and other requirements are contained in U.S. federal laws and  executive orders. Mission Order 21 is the primary document that details  the procedures to comply with applicable laws and executive orders to  help ensure that assistance does not provide support to entities or  individuals associated with terrorism. The effective date of the most  recent version of Mission Order 21 is October 3, 2007, and it has not  been updated since then, according to USAID officials. We also reviewed  memorandums and notices issued by the USAID West Bank and Gaza  mission that pertain to USAID’s antiterrorism compliance review process  and reminders about Mission Order 21 updates.
To examine the extent to which USAID complied with its antiterrorism  policies and procedures for program assistance for the West Bank and  Gaza, we interviewed officials from USAID’s Office of Inspector General  regarding its oversight requirements, and results of audits of West Bank  and Gaza assistance programs against Mission Order 21 requirements.  We examined documentation on USAID’s policies and procedures for  monitoring prime awardees’ compliance with Mission Order 21 when  making subawards and reviewed USAID’s formal compliance review  process. We looked at 23 audit reports conducted under the direction of  USAID’s Regional Inspector General and covering all prime awardees  that received fiscal year 2012, 2013, or 2014 Economic Support Fund  (ESF) assistance. We also reviewed and analyzed all 47 compliance  review reports provided to us that were conducted by USAID’s  compliance specialist on 24 prime awardees during fiscal years 2012,  2013, and 2014. We analyzed these antiterrorism compliance review  reports to assess and compile all noncompliance weaknesses with  Mission Order 21 identified by USAID in four categories: (1) the proper  vetting of subawardees and beneficiaries, (2) the timely incorporation of  the antiterrorism certificate, (3) the timely incorporation of applicable  mandatory provisions, and (4) subaward reporting. We also followed up  with relevant USAID officials regarding these identified noncompliance  weaknesses and the policies and practices USAID had in place to ensure  that such weaknesses were addressed.
To determine the extent to which the USAID West Bank and Gaza  mission complied–at the prime and subaward levels–with its vetting  requirements as well as inclusion of antiterrorism certification and  mandatory provisions for program assistance to provide reasonable  assurance that its programs do not provide support to entities or  individuals associated with terrorism, we reviewed key legal and other  requirements as well as USAID’s policies and procedures for ensuring  compliance with Mission Order 21. We discussed the USAID mission’s  implementation of Mission Order 21 with the USAID Deputy Mission  Director, senior staff, the regional legal advisor, program staff, and other  officials responsible for managing assistance projects and overseeing  contracts, grants, and cooperative agreements at the USAID mission in  Tel Aviv, Israel, and the U.S. Consulate in Jerusalem. We also  interviewed several of USAID’s implementing partners that had received  relatively large dollar contracts from USAID. In addition, we interviewed  State, USAID, and other officials involved in vetting USAID award  recipients.
We focused our review on the mission’s prime award contracts, grants,  and cooperative agreements that were made using Economic Support  Fund (ESF) programming for fiscal years 2012–2014 as well as  applicable subawards made by the prime awards during this time period.  We selected this time period because it covers the last fiscal year that we  reported on in our 2012 report and also represents the most recently  available data. The mission provided us with copies of all 48 prime  awards issued during this time frame and the relevant documentation to  support proof of vetting of key individuals and the presence of  antiterrorism certifications and mandatory provisions in awards.
To determine whether subawards complied with relevant Mission Order  21 requirements, we examined a final random generalizable sample of 91  subawards made to non-U.S. organizations and 67 subawards made to  U.S. organizations for a total of 158 subawards. Initially, we selected a  random sample of 174 subawards. However, the random sample  decreased to 158 subawards because of various issues such as missing  data, duplicates of awards, and errors identified by the mission in  subaward reporting by the prime awardee. We selected these random  generalizable samples from a universe of 8,744 subawards for fiscal  years 2012 through 2014 identified by the mission based on subaward  activity reported to the mission by prime awardees. The universe  included 8,521 non-U.S. organizations and 223 U.S. organizations. The  mission developed the universe by taking the 48 prime awards that we  had received and reviewed and identifying the corresponding subaward  reports made by each prime award. Some of the prime awards did not  make any subawards during the time frame that we examined. In total,  the mission identified 37 of the 48 prime awards that had subawards  reported. According to the mission, the subaward reports track the  subaward awarded in a certain period of time and have no association  with the fiscal year funding it received. Further, according to the mission,  their main objective in developing the subaward universe for us was to  track the vetting threshold by including all the individual subawards as  well as their cost and time modifications that could trigger the vetting  requirement per Mission Order 21. As a result, our subaward sample  included several cost modifications and time extensions to awards.
We reviewed vetting information provided by USAID for all 11 prime  awards made to non-U.S. organizations and a sample of 29 subawards  made to non-U.S. organizations. The remaining 37 prime awards and 129  subawards were made to U.S. organizations, and were therefore not  subject to vetting. We compared the vetting date to the award date to  determine if the mission vetted the appropriate non-U.S. organizations  prior to the date of award. We found that of the 91 subawards in our  sample, 29 subawards went to non-U.S. organizations that had a contract  value or a time and cost amendment value of more than $25,000 and  thus required vetting. Based on vetting information provided by USAID,  vetting was conducted and eligibility decisions were made prior to the  signing of the award in 28 out of the 29 instances, in compliance with  Mission Order 21. However, vetting was conducted in 1 instance after  the award was signed. To understand USAID’s vetting process, we  interviewed various mission officials, including the head of the Program  Support Unit, which is the division responsible for the vetting process. We  also reviewed snapshots of the Partner Vetting System (PVS), the system  in which partner information is inputted, as well as training material  related to the PVS to understand the vetting process.
To determine whether required antiterrorism certifications were obtained,  we reviewed applicable documentation provided by USAID for 16 prime  awards and 4 subawards that were grants or cooperative agreements to  determine if antiterrorism certifications were included in the award and  signed prior to the date of the award. We determined that the16 prime  awards and the 4 subawards contained a signed antiterrorism certification  that was signed in advance of the award.
To determine whether the prime awards and subawards contained  mandatory provisions, specifically two mandatory clauses, we reviewed  applicable documentation for each award to determine if the clauses were  present. We reviewed 48 prime awards to determine if both the  antiterrorism and facility naming clauses were present in the award before  it was signed. We determined that all 48 prime awards had the mandatory  clauses in the award before it was signed. For the subawards, we  reviewed all 158 subawards to determine if mandatory clauses were  present in the awards before it was signed. We used electronic searches  to identify copies of the two clauses as efficiently as possible. We  obtained the award documents from USAID in the form of scanned PDF  files and used Adobe Acrobat Pro XI to convert them into machine- readable text. This conversion was generally reliable but sometimes  introduced misspellings or other anomalies. We wrote Python code that  performed keyword searches on each of the 260 PDF files for apparent  instances of the two clauses. Each time the program found a potential  match, it computed the edit distance between the clause the search  identified and the actual boilerplate clause. We then identified the  candidate match for each award with the shortest edit distance from each  clause and produced a document listing the best potential match for each  clause in each award and a link to the PDF page from which we extracted  each potential match. The search program treated all of the PDFs  associated with a single award as a group and identified candidate  matches, for example very likely matches, for both clauses in almost all of  the awards. A GAO analyst manually reviewed each potential match on  the original PDF and either confirmed that it was the required clause or  not. If the computer did not find a match, we reviewed the entire award  document to determine whether the required clause was present. Based  on our review, we found three instances where mandatory clauses were  missing from the award.
We conducted this performance audit from July 2015 to April 2016, 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 based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings based on our audit  objectives.
section_title: Appendix II: U.S. Agency for International Development (USAID) West Bank and Gaza Mission’s Vetting Process for Awards
paragraphs: This appendix provides information on the vetting process for awards to  non-U.S. implementing partners (awardees) receiving U.S. government  funding, including contracts, grants, cooperative agreements, and  training, based on USAID documents and information from officials.
A typical vetting process starts with the implementing partner, or prime  awardee, submitting through an online portal, the Partner Vetting System  (PVS), a completed Partner Information Form that has the names and  identifying information of the organization’s key individuals, according to  the USAID mission. The prime awardee has access to the online portal to  submit the Partner Information Form and also collects and submits the  needed vetting data from proposed recipients of subawards. Figure 3  provides details of the steps in the vetting process for awards. In a small  number of cases, the implementing partner, or prime awardee, does not  have access to the online portal, and hard copy forms are sent directly to  USAID’s vetting team, known as the Programs Support Unit (PSU), which  inputs the information into the PVS. The information submitted online or  on hard copy is checked by vetting assistants at the USAID mission to  ensure that it is complete and is a valid request. The information is  compiled for a vetting package that is submitted through the portal to the  USAID Office of Security’s Counterterrorism Branch (SEC/CT) at the  Terrorist Screening Center in the United States. Until August 2015 the  vetting package to be submitted to the SEC/CT was compiled by one  member of the PSU team. In response to a vetting error identified in July  2015, the USAID mission implemented a new policy that requires an  additional check of vetting packages submitted to the SEC/CT. The new  process requires that a separate member of the PSU team verify that  packages submitted to the SEC/CT include all key individuals listed in the  Partner Information Form.
If the organization or individual submitted for vetting is found to have no  derogatory information by the SEC/CT, analysts at the SEC/CT enter an  eligible determination into PVS. If the proposed award is a contract or  training, the PVS generates an automatic notification to the  Contracting/Agreement Officer’s Representative (C/AOR) and the vetting  is a one-step process. The C/AOR notifies the awardee of the results.
If the proposed award is a cash grant or in-kind assistance, following an  eligible recommendation from the SEC/CT, the request is then sent to the  Consulate General for a second vetting step. If the organization vetted by  the Consulate General is also deemed eligible, results are entered into  PVS, and an automatic notification is sent to the C/AOR who notifies the  awardee of the results. If the SEC/CT finds derogatory information related  to an organization or individual submitted for vetting, the SEC/CT  analyzes the information to determine if an ineligible recommendation is  warranted. If an ineligible recommendation is warranted, the SEC/CT,  drafts an assessment of the derogatory information to the Supervisory  Program Support Specialist, according to the USAID mission. The  Consulate General follows a similar notification process if an organization  submitted for vetting results in an ineligible recommendation. In both  cases, the Supervisory Program Support Specialist reviews the  derogatory information and consults with key mission vetting officials who  have been granted the appropriate security clearance and have a need- to-know. The C/AOR may also be asked to provide an impact  assessment to evaluate the potential consequences for the  implementation of the program should a particular prospective  implementing partner be found ineligible.
If the mission would like to consider an award notwithstanding an  ineligible finding by the SEC/CT, the mission refers the case to the  Vetting Working Group, located in the U.S. Consulate General in  Jerusalem. The Vetting Working Group is a multiagency group,  responsible for reconciling derogatory vetting information obtained by  U.S. agencies implementing programs in the West Bank and Gaza,  according to the mission. The group meets on an ad-hoc basis and  recommends eligibility or ineligibility based on consensus, with the final  decision made by the Consul General. For cases that are not referred to  the Vetting Working Group, the Deputy Mission Director has the authority  to make final ineligibility decisions, according to the mission. Once a final  determination is made by either the Consulate General or the Deputy  Mission Director, the Supervisory Program Support Specialist enters this  determination into PVS and an automatic notification is sent to the  C/AOR. The Contracting/Agreement Officer Representative notifies the  awardee of the results.
If a program awardee has been approved through the vetting process, the  approval generally remains valid for that particular award for up to 3 years  from the date of the award. However, new vetting is required in several  circumstances. First, vetting is required if there is a change in the  awardee’s key individuals. Key individuals include principal officers of the  organization’s governing body, the principal officer and deputy principal  officer of the organization, the program manager or chief of party, and any  other persons with significant responsibility for administration of USAID- financed activities or resources. Second, new vetting is also required for  any new awards or extensions of existing awards if more than 12 months  have passed since the awardee was last approved. Third, new vetting is  required for cost extension of awards when the total cost of the subaward  including with the additional cost exceeds $25,000. USAID may rescind  vetting approval if the agency obtains information that an awardee or any  of the key individuals is or has been involved in terrorist activity,  according to USAID.
section_title: Appendix III: Comments from USAID
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Judy McCloskey (Assistant  Director), Andrea Riba Miller (Analyst-in-Charge), Bryan Bourgault, and  Ria Bailey-Galvis made key contributions to this report. Ashley Alley,  Martin de Alteriis, Justin Fisher, Jeffrey Isaacs, Debbie Chung, Brian  Egger, Robert Letzler, and Oziel Trevino provided additional assistance.
section_title: Related GAO Products
paragraphs: Foreign Aid: U.S. Assistance for the West Bank and Gaza for Fiscal  Years 2012–2014. GAO-15-823. Washington, D.C.: September 22, 2015.
Foreign Assistance: U.S. Assistance to the West Bank and Gaza for  Fiscal Years 2010 and 2011. GAO-12-817R. Washington, D.C.: July 13,  2012.
Foreign Assistance: U.S. Assistance to the West Bank and Gaza for  Fiscal Years 2008 and 2009. GAO-10-623R. Washington, D.C.: May 14,  2010.
Foreign Assistance: Measures to Prevent Inadvertent Payments to  Terrorists under Palestinian Aid Programs Have Been Strengthened, but  Some Weaknesses Remain. GAO-09-622. Washington, D.C.: May 19,  2009.
Foreign Assistance: U.S. Assistance to the West Bank and Gaza for  Fiscal Years 2005 and 2006. GAO-07-443R. Washington, D.C.: March 5,  2007.
Foreign Assistance: Recent Improvements Made, but USAID Should Do  More to Help Ensure Aid Is Not Provided for Terrorist Activities in West  Bank and Gaza. GAO-06-1062R. Washington, D.C.: September 29, 2006.