Foreign Assistance: Measures to Prevent Inadvertent Payments to Terrorists under Palestinian Aid Programs Have Been Strengthened, but Some Weaknesses Remain
Released: 2009-05-19T00:00:00

Letter

Background

The U.S. government has provided assistance to Palestinians both bilaterally and multilaterally for several decades. USAID is the agency primarily responsible for implementing the bilateral aid program, while State oversees annual contributions to international organizations, primarily to UNRWA, for the multilateral program. The focus, size, and intent of the bilateral and multilateral programs differ. Table 1 compares the main characteristics of the two programs. “Prior to the obligation of funds appropriated by this Act under the heading ‘Economic Support Fund’ for assistance for the West Bank and Gaza, the Secretary of State shall take all appropriate steps to ensure that such assistance is not provided to or through any individual, private or government entity, or educational institution that the Secretary knows or has reason to believe advocates, plans, sponsors, engages in, or has engaged in, terrorist activity nor, with respect to private entities or educational institutions, those that have as a principal officer of the entity’s governing board or governing board of trustees any individual that has been determined to be involved in, or advocating terrorist activity or determined to be a member of a designated foreign terrorist organization. The Secretary of State shall, as appropriate, establish procedures specifying the steps to be taken in carrying out this subsection and shall terminate assistance to any individual, entity, or educational institution which she has determined to be involved in or advocating terrorist activity.” “None of the funds appropriated under title II through V of this Act for assistance under the West Bank and Gaza program may be made available for the purpose of recognizing or otherwise honoring individuals who commit, or have committed, acts of terrorism.”

The Secretary of State has deferred to USAID, the implementing agency, to ensure compliance with these and similar provisions. The USAID Mission to the West Bank and Gaza (the mission) developed Mission Order 21, which outlines USAID’s procedures to help ensure that its assistance program does not inadvertently provide support to entities or individuals associated with terrorism, in accordance with U.S. law. Mission Order 21 establishes, among others, the following requirements: All solicitations and awards for contracts, grants, and subagreements must contain the antiterrorism clause. This clause reminds award recipients that they must comply with U.S. executive orders and laws prohibiting transactions with terrorists, and the provision of resources and support to individuals or organizations associated with terrorism. UN agencies that receive USAID funds must include a separate clause.

All U.S. and non-U.S. organizations must sign the antiterrorism certification before being awarded a grant or cooperative agreement to certify that the organization does not provide material support or resources for terrorism. This certification recommends that the recipient follow certain steps to comply with its obligation, including (1) screening against the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) list and the UN Security Council’s Al-Qaida and Taliban Sanctions Committee Consolidated List (UN 1267 list) before providing any material support or resources to an individual or entity and (2) implementing reasonable monitoring and oversight procedures to safeguard against assistance being diverted to support terrorist activity.

All contracts, subcontracts, grants, cooperative agreements, and subgrants must contain the clause restricting facility names, known as the naming clause. This clause states, among other things, that no assistance shall be provided under this contract or agreement for any school, community center or other facility that is named after any person or group that has advocated, sponsored, or committed acts of terrorism.

Certain individuals and organizations need to be vetted, which involves checking recipients’ names and other identifying information against databases and other information sources to determine if they have links to terrorism. “No contributions by the United States shall be made to the United Nations Relief and Works Agency for Palestinian Refugees in the Near East except on the condition that the United Nations Relief and Works Agency takes all possible measures to assure that no part of the United States contribution shall be used to furnish assistance to any refugee who is receiving military training as a member of the so-called Palestinian Liberation Army or any other guerrilla type organization or who has engaged in any act of terrorism.”

This clause is commonly referred to as “section 301(c).”

State is responsible for implementing section 301(c) and, in that capacity, oversees U.S. contributions to UNRWA. UNRWA beneficiaries include Palestinian refugees and a limited number of individuals displaced by the 1967 Arab-Israel conflict. According to UNRWA, most of the displaced individuals are in Jordan.

USAID Strengthened Its Antiterrorism Policies and Procedures and Complied with Them in Making New Prime Awards, but Has Weaknesses in Compliance at the Subaward Level

Since 2006, USAID has strengthened its antiterrorism policies and procedures to help ensure that assistance is not inadvertently provided to terrorists. USAID complied with its strengthened policies and procedures when issuing new prime awards in fiscal year 2008. Although USAID’s new monthly reporting system was intended, in part, to improve compliance at the subaward level, we found that it did not provide sufficient information for us to assess compliance.

USAID Strengthened Its Antiterrorism Policies and Procedures

USAID Strengthened Its Antiterrorism Policies and Procedures by Clarifying How They Apply to Each Assistance Agreement

In response to our 2006 recommendation, USAID strengthened its antiterrorism policies and procedures—as outlined in Mission Order 21— to help ensure that assistance is not inadvertently provided to terrorists by clarifying how those policies and procedures would be applied to each type of assistance instrument. Although USAID had established antiterrorism provisions that apply to contracts, cooperative agreements, and grants, we reported in 2006 that it had not clearly articulated how antiterrorism provisions apply to other types of assistance instruments, such as purchase orders. We recommended that USAID develop policies and procedures to address how each of its antiterrorism provisions apply to other types of assistance instruments. In its October 3, 2007, revision to Mission Order 21, USAID strengthened its antiterrorism policies and procedures by listing which clauses and certifications would apply to each type of assistance instrument—thereby responding to our 2006 recommendation. For example, the antiterrorism certification now clearly applies to grants made under contracts. In addition, USAID clarified that instruments that can function as contracts, such as purchase orders, are subject to the same policies as contracts.

USAID Strengthened Its Vetting Process

USAID strengthened its vetting process in response to a 2006 GAO recommendation that the mission’s vetting management database promote data reliability, satisfy technical documentation requirements, and meet all applicable security requirements. This recommendation was based on our finding that the mission did not routinely collect or verify detailed identifying information—such as date and place of birth—needed to fully vet individuals. We also identified weaknesses in the mission’s unclassified database, which was designed to record and track vetting results. For example, few safeguards were in place to control access to the information stored in the database. In response to our recommendation and findings, the following were completed: In December 2006, USAID instituted a new strengthened vetting system, called the Partner Vetting System. This system uses U.S. law enforcement and intelligence databases to vet the names of individuals that it receives from the mission. It also requires additional information for individuals being screened, such as the individual’s government-issued photo identification number and type (e.g., passport and passport number). Access to the system is limited to certain individuals who may have different levels of access to information in the system. For example, the clerks who enter vetting information do not have the same level of access as the contracting officer who makes the award.

USAID placed a U.S. citizen with a security clearance in charge of the office responsible for maintaining the vetting system, thereby enabling sensitive derogatory information on potential awardees to be shared with the mission. Derogatory information indicates that vetted organizations or individuals appear to have links with terrorism.

USAID conducted additional vetting at the U.S. consulate in Jerusalem for organizations receiving cash or in-kind assistance, which serves as another review to help ensure that funds are not inadvertently given to terrorists.

According to USAID officials and prime awardees we spoke with, these improvements have strengthened controls over the system and decreased vetting time from about 9 months to as little as 1 to 2 weeks.

USAID Enhanced Monitoring Efforts to Provide More Timely Information on Compliance

In 2008, USAID enhanced its efforts to monitor prime awardee compliance with applicable Mission Order 21 requirements by commissioning an additional compliance audit, hiring a compliance specialist to conduct recurring compliance reviews, and requiring that prime awardees address noncompliance findings. USAID commissioned an additional compliance audit by contracting with an independent auditing firm to review 15 prime awardees’ compliance with Mission Order 21 during the period from June 1, 2006, through January 31, 2008. The audits examined 1,094 subawards and found 70 total weaknesses; 62 awards contained at least 1 weakness and 5 of those awards contained multiple weaknesses. Thirty-eight of the 70 weaknesses were related to mandatory clauses, 13 were related to vetting approval, and 4 were related to vetting procedures. The audit also found 15 monthly reporting weaknesses. According to USAID officials, where appropriate, prime awardees took actions to address the identified weaknesses. They also said that, in response to these findings, mandatory clauses were inserted into subawards when necessary, and required vetting was conducted and each subawardee passed vetting. This one-time audit provided additional feedback to USAID on the 15 prime awardees’ compliance beyond the existing feedback provided through the annual Regional Inspector General audits.

Building on the one-time additional compliance audit, USAID further enhanced its oversight of prime awardees’ efforts to comply with their Mission Order 21-related requirements by hiring, in 2008, a compliance specialist. This specialist is responsible for conducting recurring compliance reviews of prime awardees’ subaward activities. Previously, USAID only examined prime awardee compliance with these requirements as part of periodic contract and compliance audits conducted under the direction of the Regional Inspector General. According to USAID officials, the compliance specialist’s reviews allow USAID to monitor compliance on a more timely basis than can be done with the annual USAID Regional Inspector General audits. In July 2008 the compliance specialist began conducting periodic site visits to prime awardee locations to review records related to the subawards made under USAID contracts and assistance agreements to determine whether they complied with Mission Order 21. According to the mission, the compliance specialist’s review includes inspecting documents related to each subaward contract or agreement to confirm that (1) the prime awardee had received evidence from USAID that required preaward vetting had occurred and the subawardee was eligible; (2) each subaward contract or agreement had related mandatory clauses; and (3) where applicable, the prime awardee had obtained from subawardees a signed and dated antiterrorism certification prior to making the subaward. In addition, the mission stated that, whenever possible, the compliance specialist reviews the prime awardees’ records of subaward activity to determine whether all required subawards were included in the monthly subaward reports. The compliance specialist uses a standardized checklist to determine whether an award is compliant with Mission Order 21.

The compliance specialist found problems with some prime awardees’ compliance with Mission Order 21 and their monthly reports, most of which, according to the mission, have been resolved. In his first draft summary report, the compliance specialist reviewed 2,883 subawards issued by 32 prime awardees for compliance with Mission Order 21. The specialist discovered 26 instances where the subaward did not include the naming clause, 13 where the subaward did not include the antiterrorism clause, and 2 where the antiterrorism certification was not signed prior to the award being made. The compliance specialist also found 5 instances of noncompliance with Mission Order 21’s vetting policies. In one of those instances, for example, USAID disallowed the costs submitted by the prime awardee because the prime awardee issued the subaward without obtaining vetting approval. The mission said the subawardees were subsequently vetted and cleared in the remaining four cases. According to the mission, awardees have since resolved most instances of noncompliance found by the reviewer. The remaining instances were not corrected because the award had already expired or had been cancelled by the prime awardee. Additionally, the compliance specialist found 66 instances where prime awardees had not correctly reported their subawards in their monthly reports to USAID.

USAID Complied with Its Strengthened Antiterrorism Policies and Procedures at the Prime Award Level

USAID Included All Applicable Clauses in All New Prime Awards Made in Fiscal Year 2008 and Obtained Required Certifications

All prime awardee and subawardee non- U.S. organizations or individuals (16 years old or older) proposed to receive cash or in-kind assistance under a cooperative agreement, grant, or subgrant.

We found that all 32 new prime awards made by USAID in fiscal year 2008 contained the appropriate mandatory clauses—the antiterrorism and naming clauses—and, where applicable, USAID had obtained the advanced antiterrorism certifications, as required under Mission Order 21. The antiterrorism clause reminds award recipients that they must comply with U.S. executive orders and laws prohibiting transactions with terrorists and the provision of resources and support to individuals or organizations associated with terrorism. The naming clause states that no assistance shall be provided under this contract or agreement for any school, community center, or other facility that is named after any person or group that has advocated, sponsored, or committed acts of terrorism. USAID officials said there are relatively few situations where the United States is providing assistance to the West Bank and Gaza that involves naming buildings or structures. The antiterrorism certification requires that all U.S. and non-U.S. organizations must certify, before being awarded a grant or cooperative agreement, that the organization does not provide material support or resources for terrorism.

All non-U.S. individuals (16 years old or older) who receive USAID-financed training, United States or third countries or whostudy tours or invitational travel in the receive training in the West Bank/Gazalasting more than 5 consecutive work days.

All entities or specifically identified persons (16 years old or older) who directly receiveother forms of cash or in-kind assistance, with the following exceptions (thesethresholds apply to a single award and are not cumulative): organizations that receive assistance of $2,500 or less, households that receive micro- enterprise loans or assistance of $5,000 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.

USAID vetted the appropriate officials for all four new prime awards made in fiscal year 2008 that required vetting according to Mission Order 21. In addition, USAID officials said they vetted, in fiscal year 2008, 1,239 individuals in compliance with Mission Order 21 before they received USAID assistance for scholarships, microenterprise loans, and direct cash assistance.

In establishing requirements for whom to vet, a USAID official said the mission has weighed the costs of vetting, the risks of not vetting, and the need to meet its foreign assistance goals. According to this official, the mission does not vet U.S. organizations or citizens who receive assistance due to U.S. privacy law concerns. In addition, U.S. organizations and citizens are subject to U.S. criminal statutes. This USAID official said that they set certain criteria and dollar thresholds that govern whether or not vetting is required. For example, USAID only conducts vetting at the prime and subaward levels and only vets key individuals associated with the applicable non-U.S. organization. As a result, employees of non-U.S. organizations who are not key individuals are not vetted. USAID also does not vet non-U.S. organizations and individuals that receive contracts unless the cumulative value of the contracts received in a 12-month period exceeds $25,000. (See app. II for additional information on the vetting process.)

USAID’s New Monthly Subaward Reporting System Did Not Provide Sufficient Information for Us to Assess Compliance

USAID Instituted a New Monthly Subaward Reporting System

USAID instituted a new monthly reporting system in response to a prior GAO recommendation. In 2006, GAO recommended that USAID develop a review and reporting system to help ensure prime awardees comply with the requirements related to subaward vetting, certifications, and mandatory clauses. In response, USAID instituted, as part of its plan to assess compliance, a monthly reporting requirement under which prime awardees (1) submit information on new subawards they have made (including the subawardee name and subaward type and value) and copies of required mandatory clauses and antiterrorism certifications, and (2) indicate whether the required subaward vetting took place prior to the award. The prime awardees are to send the mission a spreadsheet listing the required information for each subaward, as well as copies of the related supporting documentation. The USAID clerk who receives the information inputs the amount of each program-related subaward into the Partner Vetting System (PVS). This allows the mission to track the cumulative amount of contracts awarded to any single awardee to ensure that vetting occurs when required.

Subawards Met Vetting Requirements and Subawardees Provided Required Antiterrorism Certifications

For each of the 51 subawards from our random sample of 95 subawards made to non-U.S. organizations and individuals that required preaward vetting, the PVS showed that USAID vetted and approved each subawardee prior to the date of the subaward. In addition, for each of the 35 subawards below the $25,000 threshold the PVS included the subawardee’s name and the amount of the subaward. This information supports the Mission Order 21 requirement to vet a subawardee when the cumulative amount given to that subawardee exceeds $25,000. We also found that prime awardees obtained the signed antiterrorism certification for all six subawards that required this certification. As required, each certification was dated prior to the subaward date.

Insufficient Evidence to Assess Subaward Compliance with Requirements Related to Mandatory Clauses

Based on our random stratified sample, we estimate that 17 percent, plus or minus 7 percentage points, of all fiscal year 2008 subawards identified by USAID did not contain sufficient evidence to determine whether the mandatory clauses were included in the subaward at the time the subaward was made. In conducting our review, we found that the reported information, including the subaward information and related documentation reported monthly to USAID by prime awardees, did not include sufficient evidence to enable us to reasonably conclude whether or not the prime awardee had met the requirement to include the mandatory clauses in the subaward at the time the subaward was made.

The monthly reported information was often insufficient because prime awardees are only required by USAID to provide copies of the mandatory clauses and are not required to include within the mandatory clauses specific references to the subaward, such as the subaward number and date, or to have the subawardee sign and date the clauses. In many instances, the copies of the mandatory clauses provided by prime awardees did not contain information identifying the applicable subaward or otherwise clearly show that the clauses were included in the subawards at the time they were made. Therefore, we asked USAID to provide us with copies of the complete subaward documents for each of our 144 randomly selected subawards. However, even with the copies of actual subaward documents provided by USAID, we could not determine whether the mandatory clauses were included at the time the subaward was made for many of the subawards in our sample.

We based our estimate that approximately 17 percent of all fiscal year 2008 subawards USAID had identified did not contain sufficient evidence to assess compliance on 40 subawards from our random sample. All 40 involved purchase orders issued by 1 prime awardee. For each of the 40 subawards, we found that the information USAID provided was not sufficient to assess compliance because the purchase order documents did not contain the mandatory clauses or include a specific reference to them even though the October 2007 revisions to Mission Order 21 required that the mandatory clauses be included in each contract or grant agreement, including purchase orders. The information provided by USAID consisted of a discrete purchase order and separate additional pages containing the mandatory clauses. However, the only references to the purchase orders that were included on the copies of the mandatory clauses were individual handwritten annotations. It was not clear who made the annotations and when they were made. USAID officials said they believe the subaward information they provided was sufficient to determine compliance because the prime awardee provided USAID with copies of the separate purchase order and mandatory clauses attached together. However, we found several instances in which copies of the same mandatory clauses were provided to us as support for different purchase orders in our subaward sample even though these clauses were signed and dated with dates that were not consistent with the dates of the individual subawards. As a result, we could not reasonably conclude whether or not the prime awardee complied with the requirement to include the mandatory clauses as part of the 40 subawards at the time they weremade. To clearly establish at the time of the subaward that subawarde agreed to the mandatory clauses when the mandatory clauses are not included within a subaward each applicable contract (including purchase orders) or agreement should include a direct and specific reference to the existence and applicability of the separate mandatory clauses, and each set of related but separate mandatory clauses should include within the clauses specific and direct reference to the contract (including purchase orders) or agreement.

Some Prime Awardees Did Not Comply with Mandatory Clause Requirements when They Made Subawards

Based on our random stratified sample, we estimate that about 83 percent, plus or minus 7 percentage points, of all fiscal year 2008 USAID-identified subawards contain sufficient evidence to assess compliance. There were 104 subawards in our random sample for which we obtained sufficient documentation to determine whether the prime awardees complied with requirements related to mandatory clauses. We concluded, based on this documentation, that some prime awardees did not always comply with requirements by including mandatory clauses in subaward files at the time they made the subaward. We estimate that for 95 percent, plus or minus 4 percentage points, of those subawards with sufficient information to assess compliance, prime awardees included the mandatory clauses at the time the subaward was made, and, thus were in compliance with Mission Order 21. However, based on the evidence provided to us, we estimate that for 5 percent, plus or minus 4 percentage points, of subawards with sufficient information to assess compliance, the prime awardee did not include the mandatory clauses at the time the subawards were made.

For 14 of the 104 sampled subawards with sufficient information, the evidence provided by USAID established that the prime awardee did not include the required mandatory clauses in each applicable subaward at the time the subaward was made. For 2 of the 14 subawards, the prime awardees later modified the subaward to incorporate the mandatory clauses. For another 8 of the 14 subawards, the prime awardee subsequently obtained the subawardee’s acknowledgement that the mandatory clauses were applicable to the subaward by having the subawardee sign and date the mandatory clauses. For 3 other subawards, while the prime awardee made some efforts to incorporate the required mandatory clauses, the required clauses were not included in each applicable subaward prior to the completion of work. For the remaining subaward, the subaward was already completed when the prime awardee noted that the subaward did not include the required mandatory clauses.

State and UNRWA Have Strengthened Policies and Procedures to Determine Whether UNRWA’s Actions Are Consistent with Its Agreement to Conform with Conditions for Receiving U.S. Funds, but Weaknesses Remain

UNRWA has agreed with State to take steps to conform with the condition on U.S. contributions set forth in section 301(c) of the Foreign Assistance Act of 1961, as amended, and report to State on its efforts semiannually. However, State has not established criteria to determine whether UNRWA is in conformance with conditions on U.S. funds, though it has strengthened some oversight procedures. UNRWA has strengthened policies and procedures intended to conform with the conditions on U.S. contributions, but we found some weaknesses in UNRWA’s efforts, such as screening only against a UN terrorist list, in accordance with UN policy, and in internal audits of UNRWA operations.

UNRWA Has Agreed to Conform with Conditions on U.S. Contributions through Agreements with State

Since late 2006, UNRWA and State have signed 3 annual Frameworks for Cooperation and more than 10 letters confirming UNRWA’s commitment to conform with the condition on U.S. contributions provided in section 301(c) prior to receiving U.S. funds. In accepting U.S. government funding, UNRWA certifies that it is taking all possible measures to ensure that no part of the United States contribution is being used to furnish assistance to, among others, any refugee who has engaged in any act of terrorism. Under the Framework for Cooperation, which is renewed annually and signed by both State and UNRWA, UNRWA commits to, among other things, (1) conform with the condition in section 301(c) and (2) report every 6 months on actions it has taken to ensure conformance with the condition in section 301(c). UNRWA agrees to similar terms and conditions in U.S. contribution letters before receiving U.S. funds. Since October 2006, UNRWA has submitted five semiannual reports to State, which describe the agency’s actions to enforce rules and regulations on staff and beneficiary behavior; monitor UNRWA facilities in the West Bank and Gaza; and screen names of individuals and entities who receive UNRWA funding against a UN terrorist list.

According to UNRWA officials, the policies and procedures UNRWA established to implement the UN principles of neutrality and impartiality and the goals of the International Convention for the Suppression of the Financing of Terrorism support UNRWA’s conformance with U.S. conditions. State officials also told us they agreed that UNRWA’s efforts to ensure neutrality are consistent with and support UNRWA’s efforts to meet the condition for receiving U.S. contributions under section 301(c). Under the UN principles of neutrality and impartiality, UNRWA staff and other personnel should neither seek nor accept instructions from any government or other authority external to UNRWA. This ensures that staff and other personnel are not involved in conduct that is inconsistent with the independence and impartiality required by their status as international civil servants or service providers to the UN. UNRWA officials said UN neutrality is compatible with section 301(c) funding conditions. According to UNRWA, a staff member’s involvement in a militant group or terrorist activities would be clearly contrary to UNRWA’s staff regulations and rules and would certainly result in termination. In requiring that staff, third parties, and facilities be neutral, UNRWA proscribes a range of conduct broader than the conduct described in section 301(c). According to UNRWA rules, staff member involvement in activities such as running for political office in an election or making public political statements would result in disciplinary action, including termination. Although UNRWA does not require beneficiaries to be politically neutral to receive assistance, the agency promotes neutrality within the refugee camps and refuses assistance to refugees involved in inappropriate behavior, including section 301(c)-related activities. UNRWA defines terrorism according to the 1999 International Convention for the Suppression of Financing of Terrorism.

State Has Not Established Criteria to Determine UNRWA’s Conformance with Conditions on U.S. Funds but Has Strengthened Some Oversight Procedures

State Has Not Established Criteria to Determine UNRWA’s Conformance with Conditions on U.S. Funds

State reported that it has contributed nearly $340 million to UNRWA in the last 2 fiscal years, but State has not established written criteria to determine whether UNRWA’s efforts are consistent with the section 301(c) conditions that UNRWA has agreed to for receiving U.S. funds. Aside from the assessments by State of whether to continue funding UNRWA, State officials said that they have not developed any written criteria to analyze UNRWA’s semiannual reports and have not assessed UNRWA’s efforts against such criteria to determine conformance. For example, State has not defined what would constitute nonconformance or developed written definitions of key terms, including “all possible measures”—a concern we also raised in 2003—that would help serve as criteria for analyzing UNRWA’s semiannual reports. In addition, we found that State did not have several important UNRWA policy documents, which officials could use to help form criteria for their evaluation of UNRWA’s conformance, such as UNRWA instructions for providing relief and social services (including cash assistance) to refugees and the agency’s assessment of high-risk areas.

State officials said they consider UNRWA to be in conformance with its commitment to adhere to section 301(c) based on State’s ongoing review of UNRWA’s activities and reports through written communications and discussions with UNRWA officials. State officials told us that, to be consistent with section 301(c), they must affirm that State has an internal level of confidence that UNRWA has taken all possible measures to ensure that terrorists are not receiving assistance, such as having procedures in place and taking measures to respond to issues that arise. State officials said that they undertake immediate reviews of any information or allegations of possible concern. State officials told us that their reviews consist of an evaluation of information received from UNRWA and other sources about the allegations or questions arising from a review of the semiannual reports. State officials also note that they regularly follow up, when necessary, on what investigations and disciplinary actions UNRWA undertakes. For example, when an allegation arose that UNRWA had employed a member of Islamic Jihad, State contacted UNRWA to determine how UNRWA handled the allegation. According to State, UNRWA reported that its investigation into the matter resulted in the termination of the employee’s direct supervisors.

State Has Strengthened Some Policies and Procedures to Oversee UNRWA’s Conformance with U.S. Conditions

Despite the absence of a written evaluation by State of UNRWA’s conformance with U.S. conditions, we found that State has strengthened some policies and procedures to oversee UNRWA’s conformance with conditions on U.S. funds. In 2003, we reported that State had not defined “terrorism” for the purpose of implementing section 301(c), but State has since concurred with UNRWA in its use of the definition of terrorism contained in the International Convention for the Suppression of the Financing of Terrorism. In addition, State reported that since we began our review it has introduced several new policies and procedures to improve oversight by enhancing communication with UNRWA on section 301(c). For example, State officials revised the job description of the Regional Refugee Coordinator responsible for UNRWA to specifically include additional roles and responsibilities for monitoring and reporting on section 301(c) conformance. Also, since we began our review, State has developed additional formal communication procedures to communicate with UNRWA on section 301(c) issues. Specifically, State has introduced the following procedures: Monthly senior-level conversations between State’s Bureau of Population, Refugees and Migration (PRM) and UNRWA on section 301(c) and other priority issues. State told us that senior State officials began meeting with UNRWA in October 2008 to specifically discuss section 301(c)-related issues, including a recent meeting with the Director of UNRWA’s Gaza field office.

Bimonthly meetings between the Regional Refugee Coordinator and the U.S.-funded Operation Support Officers (OSO) for the West Bank and Gaza who inspect UNRWA facilities, as well as other relevant officials, to discuss section 301(c) issues.

Meetings between PRM Washington, D.C., staff and West Bank and Gaza OSOs to discuss section 301(c) issues during monitoring visits to the region. State officials reported that the Regional Refugee Coordinator and senior State officials from headquarters have met with West Bank and Gaza OSOs six times from November 2008 to April 2009.

An exchange of letters between State and UNRWA when incidents that are potentially related to section 301(c) occur. State recently communicated with UNRWA in a formal letter regarding issues in its most recent semiannual compliance report.

In response to a suggestion we made during our review, State is currently assessing the technical feasibility and resources involved in identifying UNRWA contractors and funding recipients that may be on the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) list of individuals and entities subject to U.S. sanctions, as well as consulting internally in order to determine whether and how it would undertake such an effort. We discussed with State the feasibility of screening the names of UNRWA contractors and funding recipients against the OFAC list to determine whether UNRWA funds are going to individuals and entities of concern to the United States. As we noted earlier, USAID recommends that all U.S. and non-U.S. organizations that sign the antiterrorism certification consider following steps that include screening names against the OFAC list before providing any material support or resources to an individual or entity. UNRWA declined a past request by State to screen names against the OFAC list on the grounds that doing so contradicts UN policy. When we compared a list of about 15,000 contractors UNRWA paid between 2002 and 2009 to the OFAC list, we found no perfect matches but did find a few possible matches. One of these possible matches was a telecommunications contractor UNRWA paid between 2002 and March 2009, which OFAC placed on its list in July 2008 for reasons related to allegations of corruption. State officials said they would need to discuss with UNRWA what the agency would do with any information regarding such possible matches, given the UN’s practice of using a UN terrorist list rather than lists provided by individual UN member governments. UNRWA officials told us that if they are notified of potential matches, they would use the information as a trigger to conduct their own investigation into the matter in accordance with their existing procedures. According to UNRWA officials, this is in keeping with UNRWA’s practice, which is to take seriously and pursue any credible information it receives regarding the possible violation of UN neutrality and impartiality principles.

UNRWA Has Strengthened Policies and Procedures Intended to Conform with U.S. Conditions on Contributions, but Limitations Exist

UNRWA Reported Denying Refugees Benefits, Including Cash Assistance, Due to Inappropriate Conduct

UNRWA reported denying approximately 110 applications for discretionary cash assistance to refugees since July 2006 because agency investigations found the refugees’ behavior was inconsistent with UN neutrality or restrictions related to section 301(c). For example, UNRWA reportedly refused burial, rehousing, and other cash assistance to refugees following its investigations into the death of beneficiaries or their spouses as a result of Israeli military incursions and operations, including targeted killings, home demolitions, or workshop damage from shelling by Israeli military authorities. According to UNRWA officials, such incidents are triggers for an UNRWA investigation to determine whether individuals were involved in inappropriate behavior and the potential denial of benefits. In addition, UNRWA reported that it has denied cash assistance for burial expenses to families of beneficiaries it found were killed by an explosion while allegedly preparing an explosive device, as well as refused cash assistance for post-surgery social care to an individual involved in such an explosion. In more than 100 other cases, UNRWA reported that it refused cash assistance to individuals whose homes were demolished or for burial of family members killed in the Israeli operations. The agency reported that it conducted field investigations following these Israeli operations, but could not find clear evidence that the individuals concerned had engaged in an act of terrorism or other inappropriate behavior. However, the agency reported that it denied assistance in these cases based on other reasons it identified in its investigations, including failure to meet some eligibility criteria, competing priorities, or insufficient resources.

UNRWA officials reported that it applies policies and procedures on assistance to refugees that further the agency’s conformance with section 301(c) conditions. However, they also said that UNRWA provides assistance in the context of its humanitarian mandate, meaning that agency policy is generally not to deny education or primary healthcare benefits. For example, UNRWA officials told us that the child of a refugee who was denied benefits because of section 301(c)-related behavior would not be disqualified from attending an UNRWA school. Similarly, the family of such an individual would remain eligible for medical services at an UNRWA health clinic. In some exceptional cases, officials stated that UNRWA would not provide education benefits to a refugee. For example, UNRWA told us the agency would deny vocational training benefits to a young adult UNRWA found to be involved in inappropriate behavior.

UNRWA Reported Disciplining and Terminating Staff Due to Behavior Inconsistent with Agency Policies

UNRWA reported investigating more than 30 cases since October 2006 relating to staff activities that were political or otherwise inconsistent with UN neutrality and taking disciplinary action, including termination, against 7 UNRWA staff as a result of these investigations. UNRWA also reported that four terminated staff members filed appeals with the Joint Appeals Board, of which UNRWA’s Commissioner-General dismissed two and two remain ongoing. For example, in the last two years, UNRWA reportedly terminated a staff member’s employment immediately upon his release from Israeli detention for conspiring to kidnap an Israeli security officer. UNRWA also reported that it terminated staff members for political activity found to be inconsistent with the independence and impartiality expected of UNRWA staff. UNRWA officials also indicated that they denied benefits to the families of staff members who were found, through investigations, to have been involved in inappropriate behavior. For example, after the agency conducted an investigation into the matter, UNRWA reportedly denied benefits, including pension benefits, to the family of a staff member who was identified by Israeli authorities as a militant and was killed by an Israeli military strike. UNRWA reported that it also terminated two other staff members for management failures in this case.

UNRWA has implemented several policies to promote staff behavior that supports UN neutrality. For example, the UNRWA Organizational Development plan introduced additional training to improve staff knowledge on UN privileges and immunities and legal capacity in all field offices. The agency also reported that it performs reference checks and background security clearances for job applicants and has established procedures to investigate inappropriate staff behavior. UNRWA also told us that it seeks information from authorities whenever staff are detained, convicted, or refused a permit or targeted by Israeli military forces. UNRWA officials said they share the names of all UNRWA staff annually with the governments of Egypt, Israel, Jordan, Lebanon, Syria, and the Palestinian Authority but have received no information on staff members from these governments. Additionally, once hired, UNRWA international staff must apply for visas from the Governments of Egypt, Israel, Jordan, Lebanon, and Syria to work in those areas. UNRWA officials told us that these processes provide regional governments, notably in Egypt, Israel, Jordan, Lebanon, and Syria, with additional opportunities to scrutinize the profiles of UNRWA staff. Additionally, local staff in the West Bank and Gaza must apply for permits from the Government of Israel for transit between certain areas. For additional information on these policies and procedures, see appendix III.

While UNRWA Reported Monitoring Facilities and Finding No Material Misuse, It Continues to Face Recurring Incursions into Facilities

Operation Support Officers (OSO) reported no instances in which agency facilities were not being used as intended, but UNRWA continues to face recurring incursions into its facilities. OSOs are to formally inspect each UNRWA facility in the West Bank and Gaza every 3 to 4 months—and informally inspect the facilities during camp visits as often as possible—to ensure that UNRWA facilities are used only to provide UNRWA aid and services, follow up on the condition of the facilities, and report on and immediately address any issues that are identified. OSOs are also responsible for removing political posters and communicating the importance of UNRWA’s neutrality to the community during camp visits. Since July 2006 UNRWA has reported more than 150 incursions into, and other violations of the immunity of, UNRWA facilities by armed Israeli military or police forces, Palestinian security forces, Palestinian militants or individual Palestinians. For example, Israeli forces reportedly used UNRWA school and health facilities as shooting positions or for interrogations, and Palestinian Authority security forces have also reportedly entered UNRWA facilities. In addition, UNRWA reported that armed Palestinian militants have forcibly entered or fired weapons at, near, or from UNRWA schools. Individual Palestinian beneficiaries who were angered by a reduction in UNRWA programming have also taken action against UNRWA facilities. UNRWA regularly protests these types of incursions as violations of its privileges and immunities under international law, and has asked the Palestinian Authority for increased police protection in cases involving Palestinian militants.

UNRWA has introduced formal OSO inspection goals for the Gaza area of three inspections per installation per year, which were absent in prior years, but UNRWA officials reported that the security situation and problems accessing the areas has increased the difficulty of meeting these goals. UNRWA reported that OSOs conducted nearly 1,100 formal inspections of its facilities in the West Bank and Gaza in 2008, meeting approximately 95 percent of its goal. In the West Bank, OSOs formally inspected each facility approximately 3.6 times (916 total inspections) in 2008, narrowly missing a goal of 4 inspections per installation (1024 total inspections). In Gaza, OSOs conducted 172 formal inspections in 2008.

However, this represents less than one inspection per installation in the Gaza area.

UNRWA currently does not have an OSO program in Jordan, Lebanon, or Syria, but according to UNRWA officials, the agency hopes to receive funding that will enable it to expand the OSO program to Lebanon. In May, UNRWA selected a new protection officer funded by the European Commission to integrate the refugees' protection into UNRWA operations in Lebanon, including monitoring and reporting to senior staff on protection-related issues. State has reported that it approved funding in April 2009 for an expansion of the OSO program to Lebanon. We found that facility inspections under the OSO program may address conditions that could undermine UNRWA’s neutrality. For example, during our visit to an UNRWA school in Jordan, where UNRWA does not currently operate an OSO program, we saw political graffiti on an exterior wall and posters created by teachers to support the school’s human rights curriculum that had some violent content. Since our visit, UNRWA officials reported that the Jordan field office has called upon senior field officials to inspect facilities and that West Bank OSOs have shared practices with these officials to improve their ability to perform functions similar to the OSOs.

UNRWA Reported Expanding Screening with a UN Security Council List and Finding No Matches, but the Screening Process Has Limitations

UNRWA told us that it has expanded its use of a UN Security Council terrorist list to now screen all recipients of agency funds and that none of its staff, contractors, beneficiaries, or microfinance clients have appeared on the list, but we found some limitations in the agency’s screening process. UNRWA screens its staff and contractors every 6 months against the UN 1267 list. In addition, for the first time, UNRWA screened all 4.6 million Palestinian refugees and microfinance clients against this list in December 2008. UNRWA officials told us that in addition to its screening and investigations of individual applicants prior to providing assistance, the agency intends to make such UN 1267 screening of all registered refugees and microfinance clients a routine procedure. The agency also enhanced transparency by introducing, in February 2009, a policy to disclose on its Web site details of UNRWA contracts valued over $100,000, which includes contractor names it screens against the UN 1267 list. However, the list is limited to those individuals or entities affiliated with Al-Qaida and the Taliban and thus does not specifically include major regional groups, such as Hamas and Hezbollah, which the United States has designated as foreign terrorist organizations. According to UNRWA, the UN Security Council has various working groups for terrorism-related issues, but the Sanctions Committee’s UN 1267 list is currently the only such UN terrorist screening list available. In addition, UNRWA does not conduct pre-employment screening of staff. UNRWA stated that screening every 6 months ensures that staff are screened during employment probationary periods. Furthermore, UNRWA told us it is unable to screen all persons displaced by the 1967 conflict who are receiving health and education benefits because the agency does not register or collect information on such displaced persons in the region.

Internal Audits of UNRWA Do Not Assess Antiterrorism Controls or the Overall Cash Assistance Program

UNRWA internal audits of its operations do not explicitly assess antiterrorism controls or controls for UNRWA’s overall cash assistance program. UNRWA reported recent efforts to expand the capacity of its Department of Internal Oversight Services, which evaluates the agency’s financial accounts, assesses the risk of fraud, and reviews the adequacy and effectiveness of internal controls systems, by hiring additional audit staff. However, UNRWA officials reported that the department has not audited signed agency contracts to determine if staff physically attach the General Conditions of Contract, which include an antiterrorism clause and which must be in every contract between UNRWA and a contractor. UNRWA told us that the legal department ensures that all contracts contain these clauses. The Department of Internal Oversight Services also reported on an agency-wide risk management effort to identify high-risk areas in 2008 and has planned audits related to UNRWA’s internal justice system and emergency assistance activities in the West Bank and Gaza funded by the agency’s Emergency Appeal request to donors. However, audits related to several high-risk areas identified in the risk management exercise, such as the Special Hardship Assistance Program in Gaza and Syria, camp reconstruction activities in Lebanon and oversight in Gaza are contingent on the availability of resources. In addition, since 2007, this department has conducted five reviews related to UNRWA staff screening processes and fraud prevention and detection, but none focused on UNRWA’s cash assistance program activities funded through the General Fund or Emergency Appeal, such as cash subsidies for food or selective or emergency cash assistance. UNRWA reported, however, that approximately 10 percent of the department’s work involves a review of a food aid and cash assistance program. The European Commission funds both the assistance program and its review. UNRWA told us that future internal audits would assess UNRWA’s compliance with its neutrality and antiterrorism policies for contractors, as well as internal controls for cash assistance. According to agency officials, this will have resource implications for the agency.

While internal audits have not focused on UNRWA’s overall cash assistance activities, the UN Board of Auditors, UNRWA’s external auditor, reported on instances of breakdowns or weaknesses in internal controls. UNRWA officials reported that after the agency investigated a case of cash assistance fraud in Gaza, the agency conducted a thorough reform of cash management procedures and held the senior managers of the program accountable for the systemic weaknesses identified and, in doing so, requested and accepted the early retirement of the 2 most senior program staff. Specifically, UNRWA reported that following this incident, the Gaza field office suspended emergency cash assistance (other than for shelter) to individuals and focused cash assistance instead on clearly defined target groups such as students enrolled in UNRWA schools and refugees enrolled in the Special Hardship program. In addition, UNRWA told us that it integrated its Emergency Cash Assistance program into a stand-alone Emergency Program, which includes a unit to monitor the integrity of emergency services.

Conclusions

It is an important U.S. goal to have processes in place to help ensure that U.S. funding for Palestinian assistance programs is not provided to individuals or entities engaged in terrorist activities. In recent years, USAID, State, and UNRWA have strengthened their policies and procedures to help ensure that assistance is not inadvertently provided to terrorists. In response to our 2006 recommendation, USAID has clarified its guidance and improved its system for vetting certain recipients of USAID assistance, thereby significantly decreasing its vetting times. In addition, State and UNRWA have agreed on a definition of terrorism, which addresses a concern we raised in 2003.

USAID complied with all applicable antiterrorism-related requirements when making its new prime awards in fiscal year 2008. Regarding prime awardees’ fiscal year 2008 subawards identified by USAID, required vetting occurred and applicable antiterrorism certifications were obtained. However, we estimate that for approximately 17 percent of the fiscal year 2008 subawards identified by USAID, there was not sufficient information to assess compliance. For the remaining subawards, we estimate that 5 percent did not contain the mandatory clauses at the time the subaward was made. In addition, the subaward information reported by prime awardees was not always sufficient to monitor compliance. Action needs to be taken to help ensure that mandatory clauses are included within each document and that prime awardees provide USAID with sufficient monthly information to clearly demonstrate that mandatory clauses have been included in applicable subawards.

State has strengthened policies and procedures to determine whether UNRWA’s efforts are consistent with its agreement to conform to U.S. conditions on funds by, for example, recently introducing additional mechanisms for communicating on section 301(c) issues with UNRWA. However, State has neither defined criteria for evaluating UNRWA’s conformance with its commitment for accepting U.S. funds nor screened names of UNRWA contractors against the OFAC list. UNRWA has strengthened its policies and procedures to conform with conditions on U.S. funds, such as expanding screening of all recipients of UNRWA funds against the UN 1267 list, but UNRWA’s internal audits do not determine whether UNRWA contractors have signed contracts that include the required antiterrorism clause or assess controls for UNRWA’s overall cash assistance program. Addressing these weaknesses would provide greater assurance that assistance is not inadvertently being provided to terrorists.

Recommendations for Executive Action

To strengthen compliance with USAID policies and procedures at the subaward level, we recommend that the Administrator of USAID take action to help ensure that the mandatory clauses are included within each subaward contract or agreement or, when not included within the contract or agreement there is sufficient evidence to clearly establish that the subawardee has agreed to comply with mandatory clauses at the time the award is made; and prime awardees provide sufficiently detailed information in their monthly subaward reports to clearly demonstrate that mandatory clauses were included in the subaward at the time the award was made.

To help ensure that assistance is not inadvertently provided to terrorists, we recommend that the Secretary of State consider taking additional steps to oversee UNRWA’s conformance with U.S. conditions on funding, such as (1) establishing criteria to evaluate UNRWA’s efforts; (2) screening the names of UNRWA contractors against lists of individuals and entities of concern to the United States; and (3) monitoring UNRWA’s commitment that future internal audits would assess UNRWA’s compliance with its neutrality and antiterrorism policies for contractors as well as internal controls for cash assistance.

Agency Comments and Our Evaluation

USAID, State, and UNRWA provided written comments on a draft of this report (see app. IV, V, and VI). USAID, State, and UNRWA outlined actions they plan to take to implement our recommendations. USAID stated that our work contributed positively to the continuous improvement and strengthening of USAID West Bank and Gaza mission’s compliance with antiterrorism policies and procedures. However, USAID disagreed with the extent of our finding that insufficient evidence was present to assess whether a significant percentage of subawards were in compliance. We maintain that evidence was insufficient because the only references to the purchase orders that were included on the mandatory clauses were individual handwritten annotations. It was not clear who made the annotations and when those annotations were made. To implement our recommendations USAID stated that it will issue new instructions to the mission’s prime awardees to help ensure that contracts and agreements contain clear and specific references to attached clauses and clauses likewise contain clear and specific references to the base agreement. USAID also plans to instruct prime awardees to explain any inconsistencies in their monthly subaward reports. Additionally, USAID will require prime awardees to certify that their monthly subaward reports are both accurate and complete.

State recognized that it is appropriate for the department to consider taking additional steps to further ensure that U.S. assistance to UNRWA is not inadvertently provided to terrorists. State concurred with two parts of our recommendation. State said that it will work with UNRWA to develop criteria, as appropriate, as well as reporting requirements, which will be documented in State and UNRWA’s Framework for Cooperation for 2010. State also said that the internal audits we recommended would prove beneficial to UNRWA’s operations and conformance with section 301(c) and noted UNRWA’s written commitment to conduct internal audits of key UNRWA processes. State is actively assessing the feasibility of screening names of UNRWA contractors against lists of individuals and entities of concern to the United States. State said that addressing two parts of our recommendation will have resource implications for State and UNRWA, since additional resources would be required to effectively screen names and conduct additional internal UNRWA audits.

UNRWA also welcomed our report and findings and made a commitment that future internal UNRWA audits would assess the agency’s compliance with its neutrality and antiterrorism policies for contractors and internal controls for cash assistance. UNRWA said it would facilitate State’s monitoring of this commitment and work with State to develop criteria for UNRWA’s conformance to section 301(c). In addition, USAID, State and UNRWA provided technical comments on a draft of this report, which we have incorporated as appropriate.

We are sending copies of this report to other congressional offices, State, USAID, and UNRWA. The report also is available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Other contacts and major contributors are listed in appendix VII.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) assess the extent to which the U.S. Agency for International Development (USAID) has complied with its policies and procedures to help ensure that its programs do not provide support to entities or individuals associated with terrorism in the West Bank and Gaza and (2) assess the Department of State’s (State) and UNRWA’s policies and procedures to support conformance with U.S. statutory conditions placed on contributions provided to UNRWA to prohibit funding of terrorist-related activities.

USAID Policies and Procedures

To determine the extent to which t Gaza (the m policies and procedures to h support to entities Bank and Gaza, we identified releva as USAID policies These legal and other requirem laws, executive orders, and mission’s primary document that details the procedures to comply with applicable laws and executive not provide The mission revised Mission its antiterrorism p recommendations we made in a 20 he USAID Mission to the West Bank and ission) complied—at the prime and subaward levels—with its elp ensure that its programs do not provide or individuals associated with terrorism in the West nt legal and other requirements as well and procedures to comply with those requirements. ents are contained in U.S. appropriations the U.S. code. Mission Order 21 is the orders to help ensure that assistance does support to entities or individuals associated with terrorism.

Order 21 effective October 3, 2007 to update rocedures in response to, among other things, 06 report.

We discussed the mission’s imp USAID Mission Direct and other officials responsible for managing assistance projects and overseeing contracts, grants, an Missio interviewed five of USAID’s im relatively large do and the United States. We interviewed State, U involved in vetting USAID USAID’s Regional Inspector Ge audits of West Bank and G strengthen USAID’s auditing procedures. lementation of Mission Order 21 with the or, senior staff, regional legal advisor, program staff, d cooperative agreements at the USAID n in Tel Aviv, Israel, and the U.S. Consulate in Jerusalem. We also plementing partners that had received llar contracts from USAID in the West Bank, Jerusalem, SAID, and other officials award recipients. In addition, we interviewed neral in Cairo to determine the results of aza assistance programs and steps taken to e focused our review on the mission’s prime award contracts, grants, W and cooperative agreements and subawards that were made during fiscal year 2008 through the Economic Support Fund, in accordance with the mandate contained in the Consolidated Appropriations Act for fiscal year 2008 (PL 110-161). To determine whether the mission’s prime awards contained the applicable antiterrorism certification and clauses as required by Mission Order 21, we reviewed copies of all 32 new prime awards issued by the mission during fiscal year 2008. To determine whether the subawards complied with relevant Mission Order 21 requirements, we selected a random stratified sample of 95 subawards made to non-U.S. organizations and 49 subawards made to U.S. organizations, a total of 144 subawards. Initially, we selected a random sample of 147 subawards. However, because one of the reported subawards (to a U.S. organization) ide ntified by USAID was not actually executed, we had a random sample of 146 subawards. We also removed from the sample 2 subawards that did not require mandatory clauses, resulting in a random stratified sample of 144 subawards. Our sample of 49subawards made to U.S. organizations was drawn from a subpopulation o f 101 subawards and our sample of 95 subawards made to non-U.S. organizations was drawn from a subpopulation of 2,519 subawards. We selected these subaward sample sizes to estimate compliance rates with confidence intervals of no more than plus or minus 10 percent for both th U.S. organizations and the non-U.S. organizations. The percentages report for all subawards are weighted to reflect the fact that we oversampled the U.S. subawards in order to ensure that we obtained a sufficient number for making projections for that strata.

We selected these random stratified samples from a universe of 2 fiscal year 2008 subawards identified by the mission based on subaward activity reported to the mission by prime awardees. The mission developed the universe by assembling the subaward spreadsheets that were available as of October 2008 and provided by each partner who had an active prime award during the period from October 3, 2007 through September 30, 2008. The spreadsheets included U.S. and non-U.S. subawards. From the subawards reported on these spreadsheets, the mission identified subawards made during the period from October 1, through September 30, 2008 and filtered out all subawards made outside of those dates. The mission then created a list containing the names of the organizations receiving each subaward and the start and end date of each subaward. At our request, the mission then added information to the list t include the amount and type of each subaward (e.g. contract, grant). In addition, if the mission found a subaward reported in New Israeli Shekels, it replaced the amount in shekels with an estimated conversion to U.S. dollars to help facilitate the GAO selection process. In addition, if the mission found an entry with an end date listed as “immediately,” it replaced this word with a date identical to the start date. The mission's objective was to include all individual subaward agreements and exclude any extensions and modifications to those awards. However, according to the mission, their attempt to exclude extensions and modifications was o limited to those instances in which the information was available from prime awardee’s monthly reports. As a result, our sample included s modifications and extensions. In addition, our sample included 2 instances in which prime awardees bundled multiple procurements and reported them as a single subaward. We did not attempt to correct for these cases, but instead made a modification to the decision rules we us to determine compliance.

We examined in detail (1) the vetting documentation maintained by the mission on its Partner Vetting System (PVS) to determine if the missio n had vetted non-U.S. prime awardees and a sample of subawardees as required by Mission Order 21 and (2) prime award and subaward documentation for a sample of subawardees to determine if the antiterrorism certifications were signed and the mandatory clauses wereincluded in the prime awards and subawards as required by Mission Orde 21. We reviewed the vetting information in the PVS for all four prime awards made to non-U.S. organizations and a random stratified sample o 95 subawards made to non-U.S. organizations. The remaining 28 awards and 49 subawards were made to U.S. organizations, and so were not subject to vetting. We compared the vetting date to the determine if the mission vetted the appropriate non-U.S. organizations prior to the date of award. To understand the mission’s vetting process, we interviewed various mission officials including the head of the Program Support Unit, which is the division responsible for the vetting pro determine whether the subawards contained the required mandatory clauses and whether required antiterrorism certifications were obtained, we reviewed applicable documentation for a random sample of 95 subawards made to non-U.S. organizations and 49 subawards made to U.S. organizations, a total of 144 subawards.

UNRWA Policies and Procedures

To assess UNRWA’s and State’s policies and procedures to support conformance with U.S. statutory conditions placed on assistance to UNRWA, we reviewed the applicable federal law—section 301(c) of the Foreign Assistance Act of 1961, as amended. We also reviewed documentation on 3 Frameworks for Cooperation between State and UNRWA and 10 U.S. contributions letters that describe UNRWA’s agreement to conform with U.S. conditions on funds for 2007 through 2009; State’s processes for overseeing UNRWA’s conformance to U. S. conditions; and documents describing State discussions on UNRWA’s conformance to U.S. conditions. We also interviewed State officials in Amman, Jordan; Jerusalem; and Washington D.C., including the Regional Refugee Coordinator in Jerusalem, who are responsible for implementing section 301(c) and overseeing U.S. contributions to UNRWA.

To describe UNRWA policies and procedures to help ensure that all possible measures were taken to assure U.S. funds were not used to furnish assistance to any refugee who, among other things, engaged in any act of terrorism, we reviewed our 2003 report on UNRWA, as well as UNRWA and UN budget, policy, and program documents for fiscal years 2007 and 2008. We also examined five UNRWA semiannual reports on UNRWA’s efforts to conform to agreements with U.S. conditions on fund from July 2006 through December 2008. These reports provide data on staff disciplinary actions, denial of benefits to refugees, inspection incursions into UNRWA facilities, and screening of recipients of funds against the UN Security Council’s Al-Qaida and Taliban Sanctions Committee Consolidated List (UN 1267 list). We also interviewed UNRWA headquarters and field officials in Amman, Jordan and Jerusalem responsible for implementing and overseeing UNRWA’s programs, including the Commissioner-General; Deputy Commissioner-General; Directors of UNRWA Field Offices; senior officials in the Departments of Administrative Support, Finance, Internal Oversight, Legal Affairs, and several program offices; and staff responsible for monitoring facilities in the West Bank and Gaza areas. Furthermore, to obtain information on UNRWA’s programs and oversight activities in the agency’s refugee camp we visited three camps in the West Bank and outside Amman (Jalazone, Jabal el-Hussein, and Baqa’a refugee camps) where we spoke with UNRWA staff and Palestinian refugees about their understanding of the the agency’s policies and procedures. We also met with an official from government of Israel’s Ministry of Foreign Affairs Department for UN Political Affairs. dditionally, we compared a list of contractors used by UNRWA from 2002 A to 2009 with the U.S. Department of Treasury’s Office of Foreign Ass Controls (OFAC) Specially Designated Nationals and Blocked Person as of February 3, 2009. Our relatively basic computerized matching comparison focused strictly on the “name” field supplied by UN OFAC, including both individuals and entities, although information fo the place of birth and date of birth fields were available for some r individuals in the OFAC list. The UNRWA list contained approximately 20,000 records with names, while the OFAC list contained approximately 9,000 primary names and more than 5,000 aliases. We removed “tokens” or make parts of names, such as prefixes or suffixes on names, in each list to n the matching process possible. For the UNRWA list of names, we the removed any name which only comprised one token, such as the name “Ali.” The original OFAC list contained a string of information includin names, dates of birth, and places of birth that were wrapped on multiple lines. After converting the data into a more usable form, taking into account both primary names and aliases, we were able to produce a usable file from the OFAC list with approximately 14,600 names.

Matching was complicated by a number of factors, such as name formats that varied, many names that had been translated from foreign languages and multiple aliases for some of the individuals named. We addressed these issues to the extent possible with the available software and es performed a comparison of these names to produce potential match between the two lists. While a perfect match between the two lists wou require the records in each list to be identically matched, we found that , names in the two lists may have varied in terms of the number of tokens punctuation considerations, the translation of foreign sounding names an variations in spelling. Therefore, we identified records that were reasonably similar to be potential matches. For each potential match, we performed a manual review of the available information on the records using other Internet sources, to help determine whether these were possible matches. It is worth noting that more sophisticated software, specifically dedicated to the Arabic language that takes into account linguistics or phonetic sounds for each name, may reveal additional information abou t potential matches.

We conducted this performance audit from August 2008 to May 2009 in accordance with generally accepted government auditing standards. Tho standards require that we plan and perform the audit to obtain sufficient, nd appropriate evidence to provide a reasonable basis for our findings a 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.

Appendix II: USAID Mission to the West Bank and Gaza Vetting Process

Mission Order 21 states that the USAID Mission to the West Bank and Gaza must vet certain non-U.S. recipients of USAID funding, which involves checking recipients’ names and other identifying information against databases and other information sources to determine if they are involved with terrorism. The Program Support Unit (PSU) at the USAID Mission coordinates the vetting process for those requiring vetting, as shown in figure 1. ? ? is derogatory?

Appendix III: UNRWA Policies and Procedures for Cash Assistance, Staff Neutrality, Use of UNRWA Facilities, and Contractor Behavior

UNRWA has several policies and procedures to h and UNRWA’s conformance with conditions on receiving U.S. funds. This appendix provides additional information on specific policies and procedures that UNRWA uses to implement its cash assistance activities and promote the neutrality of agency staff, facilities, and contractors.

Policies for Cash Assistance to Refugees

Policies for Special Hardship and Cash Assistance

UNRWA has policies to oversee the relief and social services assistance it provides to refugees, including special instructions for Special Hardship, selective, and emergency cash assistance. UNRWA policy is to provide Special Hardship cash subsidies for food only to registered Palestinian refugees. In addition, UNRWA staff are to screen applicants’ eligibility for cash assistance. The screening process includes a home visit by a social worker and follow-up checks to ensure assistance has been used for the designated purpose. Under written UNRWA instructions for assistance, if a family has other sources of income, such as Palestinian Authority ministries or charitable organizations, it may be disqualified from receiving UNRWA cash assistance. Agency officials also reported that UNRWA uses a computerized distribution list for Special Hardship cash subsidies for food, which has been reviewed by finance and social services staff in the field. Similarly, agency policy states that senior field staff are responsible for overseeing cash distributions, a social worker is required to be present at each distribution point, and refugees must provide certain documentation to receive cash assistance. In addition, senior officials in the Department of Relief and Social Services are required to conduct random visits and review case files to ensure proper handling of Special Hardship cases by social workers and staff. Social workers are also to rotate among areas to alleviate social pressures they may face from refugees. UNRWA also recently introduced the use of a needs-based formula, the proxy means test formula, as criteria for receipt of certain social services, such as Special Hardship assistance, in order to target benefits to those in most need.

Other Policies for Cash Assistance

UNRWA has additional measures to oversee its cash assistance activities. For example, for both selective and emergency UNRWA cash assistance, UNRWA policy is that social workers are to make field inquiries to examine an applicant’s emergency circumstances prior to making a recommendation for assistance. Depending on the amount of assistance recommended, senior relief and social services officials at varying levels of hierarchy must then review the recommendation. Social workers are to conduct follow-up visits with beneficiaries, and senior field officials are to perform random checks to determine whether funds are spent for approved uses. In addition, relief and social services officials in the field must report monthly to the head of the department on any selective or emergency cash assistance approved and issued.

Policies and Procedures to Promote UNRWA Staff Neutrality

UNRWA reported that it has implemented various policies and procedure to promote staff neutrality, including both pre- and post-hire policies on staff behavior. In cases where UNRWA investigates and finds staff behavior inconsistent with UNRWA policies, UNRWA policy is to discipline or terminate the staff.

General Policies for UNRWA Staff Neutrality

UNRWA reported that it has implemented various policies and procedures to promote staff neutrality. For example, UNRWA requires staff to sign a neutrality pledge in each employment contract and an annual verification statement on outside activities. Officials reported that staff receive information on neutrality policies during their induction upon employment, including training on UNRWA privileges, immunities and responsibilities, and staff receive ongoing guidance from senior officials in the field and headquarters. UNRWA staff rules also require staff members to avoid actions and public pronouncements that may adversely reflect on the integrity, independence and impartiality required by their positions. While UNRWA does not expect staff to give up their national sentiments or their political and religious convictions, the agency requires staff to bear in mind the reserve and tact incumbent upon them by their employment at UNRWA. For instance, staff may exercise their right to vote, but may not engage in any political activity inconsistent with independence and impartiality. UNRWA staff rules and regulations do not prohibit membership in and payment of norma l financial contributions to a political party, provided that membership does not obligate, entail or result in statements or actions that violate the staff member’s UN neutrality and impartiality obligations.

Prehire Poli UNRWA Staff Neutrality

Policies for Investigating UNRWA Staff Behavior

UNRWA has also established procedures to investigate inappropriate staff behavior, which may result in the disciplining or termination of staff ns or example, investigations may consist of fact-finding investigatio formal Boards of Inquiry involving legal officers or senior management, with the technical assistance of UNRWA’s Department of Legal Affairs or Department of Internal Oversight Services. Staff members have an obligation to report misconduct and are protected from retaliation under UNRWA’s whistleblower and antireprisal policy, and according to officia the agency takes swift disciplinary action whenever there is evidence of staff member involvement in inappropriate political or military activities. d Officials stated that this disciplinary action is well-known, predictable an consistent, and has a deterrent effect. UNRWA told us the agency also has formal procedures for staff to appeal investigation results through th UNRWA Joint Appeals Board, but the Commissioner General is responsible for all final determinations. Staff may also seek recourse after e the UNRWA Joint Appeals Board process through the UN Administrat Tribunal, the decision of which is binding on UNRWA as a UN agen cy.

Rules and Regulations for the Use of UNRW A Facilities by Outside Entities

NRWA field offices have established rules and regulations for the use of U UNRWA facilities in Jordan, Lebanon, and the West Bank by out entities, and the Gaza and Syria field offices have a policy of not permittin g use of UNRWA facilities by any outside entity. Use of UNRWA facilities inJordan, Lebanon and the West Bank requires a formal written request and approval by the field office director. Officials reported that a general condition of any UNRWA approval is that the organization using an UNRWA facility respects UN neutrality, and UNRWA may monitor the event. The agency also has a policy of approving use of facilities for non- political activities only. However, UNRWA told us that it does allow governmental authorities to request the use of facilities for polling stations, providing that campaigning is not present. For example, the government of Jordan has used UNRWA schools as polling stations. Officials reported that the agency has also allowed the use of its facilities for other approved purposes, including use by UNRWA summer camps and by international organizations such as the United Nations Children’s Fund and World Health Organization. In addition, certain communit based organizations, affiliated to varying extents with UNRWA, may use nt to premises provided by UNRWA in all five fields of operation, pursua conditions in a memorandum of understanding. Officials reported that relief and social services staff work closely with and monitor such organizations.

Policies and Procedures Regarding Contractor Behavior

UNRWA’s procurement policies and procedures communicate the agency’s expectations for contractor behavior. In addition to its General Conditions for Contract, which includes an antiterrorism clause, when signing contracts with the agency, contractors must also abide by the UN Supplier Code of Conduct, which includes a conflict of interest and corruption clause and outlines corporate policies and practices expected of all UN suppliers. According to UNRWA officials, as a UN agency, UNRWA also checks contractors against the UN Suspended/Removed Vendor Report, which identifies those vendors confirmed to be doing business in an unethical or corrupt manner. Individual contracts are managed by procurement staff in the Department of Administrative Services, and officials reported that any inappropriate conduct would result in a termination of contract.

Appendix IV: Comments from the U.S. Agency for International Development

The following is GAO’s comment on USAID’s letter dated May 8, 2009.

GAO Comment

1. We maintain that evidence was insufficient to assess compliance because the only references to the purchase orders that were included on the mandatory clauses were individual handwritten annotations. It was not clear who made the annotations and when those annotations were made.

Appendix V: Comments from the U.S. Department of State

Appendix VI: Comments from the United Nations Relief and Works Agency for Palestine Refugees in the Near East

Appendix VII: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Cheryl Goodman, Assistant Director; Ashley Alley; Debbie Chung; John Craig; Martin de Alteriis, Justin Fisher, Mitchell Karpman, Justin Monroe, Mary Moutsos; John Reilly; Suneeti Shah; Elizabeth Singer; and Omar Torres made key contributions to this report.