A U.S. government-funded enterprise fund is an organization that is designed to promote the expansion of the private sector in developing and transitioning countries by providing financing and technical assistance to locally owned small and medium-sized enterprises. The U.S. government provides initial capital to an enterprise fund through a grant; the fund may then seek additional capital from the private sector to invest alongside the enterprise fund. Enterprise funds are modeled on investment management in the venture capital industry, in which venture capital is invested primarily in small companies during early stages of their development with the investors monitoring, advising, and following up on operational results. It is expected that some investments will fail, but successful ventures are intended to offset the losses over the long term. The U.S. government initially funded enterprise funds in the early 1990s to promote the development of the private sector in Eastern and Central European countries following the breakup of the former Soviet Union in December 1991. USAID invested $1.2 billion to establish 10 enterprise funds, covering 19 countries in Central and Eastern Europe and the former Soviet Union. In September 2013, USAID issued a lessons- learned report that documented the successes and challenges faced by the Eastern and Central European enterprise funds.concluded that while enterprise funds have demonstrated that they can be a successful tool in achieving positive financial returns and developmental objectives, results to date have been mixed, based upon the economic and political environment in which they operate along with the overall investment strategy and the specific investment decisions made by each fund's board and management team. The report also stated that, in many cases, the enterprise funds in Europe and Eurasia took up to 2 years before they were ready to make their first investments. In early 2011, the events characterized as the Arab Spring renewed interest in the potential use of the enterprise fund model in the Middle East region as well as in other countries undergoing economic and political transition. EAEF and TAEF were thus modeled after the enterprise funds in Eastern and Central Europe. EAEF was incorporated in October 2012 and funded in March 2013, when the grant agreement between USAID and EAEF was signed. TAEF was incorporated in February 2013 and funded in July 2013, when the grant agreement between USAID and TAEF was signed. The Funds' authorizing legislation allows them to achieve their goals through the use of loans, microloans, equity investments, insurance, guarantees, grants, feasibility studies, technical assistance, training for businesses receiving investment capital, and other measures. The Funds have a dual mandate, or "double bottom line," in that they are intended to achieve a positive return on investment while also achieving a positive development effect. The authority of the Funds to provide assistance expires on December 31, 2025. The Funds are established as nonprofit corporations that do not have shareholders and do not distribute dividends. The authorizing legislation states that each Fund shall have a board of directors that is composed of six private U.S. citizens and three private host-country citizens. The authorizing legislation further requires that board members have international business careers and demonstrated expertise in international and emerging markets investment activities. According to a September 2013 lessons-learned report by USAID on past enterprise funds, identifying and recruiting the most experienced individuals to serve on the fund's board of directors is the single most important element in achieving the fund's long-term development goals and financial profitability. U.S. board members serve on a volunteer basis, while the Egyptian and Tunisian citizen board members are permitted to receive compensation for their time and services. The Funds' boards are responsible for establishing their own operating and investment policies and directing their corporate affairs in accordance with applicable law and the grant agreements. EAEF has not made any investments in Egypt, as its first investment, to purchase an Egyptian bank, did not come to fruition. EAEF's investment strategy had been to purchase a bank that would lend money to small and medium-sized enterprises in Egypt. According to the EAEF Chairman, EAEF envisioned that it would have a greater impact on the Egyptian economy by making one large investment rather than a series of smaller investments. In August 2013, EAEF made plans to purchase a small bank in Egypt and subsequently conducted due diligence on the bank by hiring a large U.S. accounting firm to review the bank's financial situation, among other things. In June 2014, the EAEF Board of Directors approved a decision to acquire the bank. However, according to the EAEF Chairman, the Egyptian Central Bank rejected EAEF's application to purchase the bank. As of December 2014, EAEF was considering other investment options. According to EAEF officials, the Fund is now conducting due diligence on potential investments in the food and beverage, healthcare, and consumer finance sectors. The Chairman stated that he anticipates investing $60 million to $90 million in these three areas. Additionally, the EAEF Chairman told us that EAEF plans to consider investments in firms varying in size from SMEs to larger firms. USAID has obligated $120 million to EAEF, of which approximately $588,000 has been disbursed. Costs associated with performing the due diligence review constituted the majority of EAEF's expenditures through 2014. Specific categories of EAEF's expenditures include professional (e.g., legal) fees and travel expenses. Thus far, EAEF has spent less on administrative expenses than the approximately $3 million estimated for the first year in its preliminary budget. USAID has obligated $60 million to TAEF, of which TAEF has disbursed approximately $1.6 million, for administrative expenses and investments. TAEF plans to promote private sector development in Tunisia by investing in (1) a private equity fund that supports SMEs, (2) direct investments in SMEs smaller than those targeted by the private equity fund, (3) microfinance institutions, and (4) start-ups. In 2013, TAEF established a subsidiary company in Tunisia--the TAEF Advisory Company--that directly oversees TAEF's efforts in these four areas. In June 2014, TAEF committed to its first investment of over $2.4 million in a private equity fund that invests in SMEs in a variety of industries, such as telecommunications, agribusiness, and renewable energy. TAEF is one of several investors in the private equity fund; other investors include foreign donors. According to the TAEF Chairman, aggregate investments in the Fund from all sources total approximately $20 million. TAEF officials told us that the Fund will have representation on the equity fund's advisory committee. According to TAEF officials, the Fund has not yet made any investments in the remaining areas of direct investments in SMEs smaller than those targeted by the private equity fund, microfinance institutions, and start- ups. According to the TAEF Chairman, TAEF is in the process of conducting due diligence on two microfinance entities. Thus far, TAEF has spent less on administrative expenses than the approximately $900,000 estimated for the first year in its preliminary budget. Since their inception, EAEF and TAEF have made progress in establishing key administrative infrastructures necessary to support their investment operations. The Committee of Sponsoring Organizations of the Treadway Commission's (COSO) 2013 internal control evaluation tool establishes a framework for assessing management structures. As shown in table 1, EAEF and TAEF have made progress in establishing structures for administrative infrastructure, corporate governance, internal control, and human capital management in line with key elements of the COSO framework. Administrative infrastructure Administrative infrastructure refers to the basic systems and resources needed to set up and support organizations' operations-- which also contribute to developing a culture of accountability and control. Since being funded in 2013, EAEF and TAEF have focused on establishing essential administrative infrastructures. EAEF set up its headquarters in New York City, New York. In July 2014, EAEF hired its first employee to occupy the position of Chief of Staff and Director of Policy Planning. According to the EAEF Chairman, EAEF plans to hire an investment manager and a chief financial officer in the future. TAEF has a U.S. office located in Washington, D.C., and a Tunisian office located in Tunis, Tunisia, both of which are led by a managing director. TAEF plans to hire two investment officers in the future. EAEF and TAEF administrative expenses thus far have mostly consisted of professional fees (e.g., expenses for legal and consulting services), travel expenses, and so forth. Corporate governance Corporate governance can be viewed as the formation and execution of collective policies and oversight mechanisms to establish and maintain a sustainable and accountable organization while achieving its mission and demonstrating stewardship over its resources. Generally, an organization's board of directors has a key role in corporate governance through its oversight of executive management; corporate strategies; and risk management, audit, and assurance processes. The Funds have established bylaws and other rules for corporate governance. The bylaws cover the purpose of the Funds, voting rules, and the duties and responsibilities of corporate officers. The boards of both Funds have met regularly since their inceptions. In addition, the Funds have established corporate policies and procedures, which USAID has approved. In November 2014, the EAEF Board of Directors established several committees, including an investment committee, a governance and nominating committee, an external relations committee, and an audit committee. EAEF and TAEF each have to fill two vacant board member positions, one for a U.S. citizen and the other for a host country citizen. EAEF and TAEF are currently considering potential candidates to fill the vacant positions. EAEF and TAEF have established a variety of internal controls in the areas of control environment, risk assessment, control activities, information and communication, and monitoring, with additional actions under way. Internal control Internal control provides reasonable assurance that key management objectives-- efficiency and effectiveness of operations, reliability of financial reporting, and compliance with applicable laws and regulations--are being achieved. Areas of internal control include control environment, risk assessment, control activities, information and communication, and monitoring. Control environment. The Funds have established directives on ethical business practices and detailed conflict-of-interest policies. In addition, each Fund has a policy on disciplinary sanctions that states that any violation of the Fund's laws or ethical guidelines could subject an individual to potential disciplinary sanctions, such as probation or reduction in pay. Risk assessment. EAEF conducted a due diligence review for its first potential investment, the purchase of a bank. Among other things, EAEF hired a large accounting firm to review a sample of the bank's loans. TAEF established due diligence procedures in which it examined the governance, financial, operations, and legal status of its first investment. Before funding its first investment, TAEF carried out its due diligence procedures and determined that there were no significant issues (e.g., financial or legal issues) that would impede TAEF from making the investment. The meeting minutes of the board investment committee indicate that the board discussed the results of the due diligence assessment, including the extent of risk involved, and that the board unanimously approved the fund's first investment. Control activities. EAEF and TAEF have established several financial and cash management-related controls, including the following: Financial statements will be prepared on a quarterly basis and sent to the audit committees of the board of directors to review the performance of the Funds on a timely basis. Each Fund will, to the extent practicable, prepare an annual budget detailing its estimated operational requirements. The budget will be approved by the president and audit committee of the board of directors before the beginning of the Fund's fiscal year (January 1).financial reports that compare the actual results to the budgeted amounts. Quarterly, the board of directors will receive Expenses in excess of a certain amount must be approved in advance by the Chairman of the Board or the President (or their designees) and one other Director. All available periodic financial statements and (if prepared) audits for all entities in which the Fund has invested shall also be maintained for audit review and project monitoring. Information and communication. EAEF and TAEF corporate policies state that each Fund will maintain an investment database that lists all of its investments and will include information such as company name, amount of investment, and industry. The Funds have met with several external organizations to discuss their mission and activities, including U.S. government agencies, foreign governments, international organizations, and host country businesses. Monitoring. EAEF and TAEF have reported to external parties, including Congress, USAID, and the public, on their use of resources, with additional accountability actions under way. For example, both Funds submitted reports to Congress that detailed their administrative expenses for 2013, and both Funds have submitted quarterly financial reports to USAID for its review. With regard to performance planning and reporting, EAEF officials said that the Fund is in the process of developing its required performance monitoring plan. In November 2014, TAEF developed a solicitation for firms based in Tunisia to develop its performance monitoring plan. In terms of audits, the Funds are responsible for appointing independent certified or licensed public accountants, approved by USAID, to complete annual audits of the Fund's financial statements. According to the grant agreements, the audits will be conducted within the scope of U.S. generally accepted auditing standards. According to USAID officials, the Funds plan to have their 2013 and 2014 financial statements audited. Human capital management Cornerstones of human capital management include leadership; acquiring, developing, and retaining talent; and building a results- oriented culture. The Funds are meeting their initial human capital needs through hiring of a limited number of personnel to occupy key positions, such as a managing director. According to the EAEF and TAEF Chairmen, they envision their organizations as having a small number of personnel. Accordingly, both Funds have recruited a limited number of employees to support their administrative operations and initial investment planning. Specifically, EAEF has hired one employee as its Chief of Staff and Director of Policy Planning. TAEF has hired three employees to include a Managing Director based in Washington, D.C.; a Chief Operating Officer and Managing Director based in Tunis, Tunisia; and an Executive Assistant based in Tunis. The Funds took steps to recruit and hire their initial staff, such as by interviewing potential candidates and reviewing their resumes. The Funds have generally outsourced their accounting and legal functions. Both Funds have created job descriptions for their employees. To build a results-oriented culture, the Funds have established guidelines for providing compensation to their employees. For example, contingent upon USAID approval of a compensation framework, the Funds may enter into bonus or incentive compensation arrangements with their employees. The EAEF and TAEF grant agreements state that the salaries and other compensation of any of the directors, officers, and employees of the Funds shall be set at reasonable levels consistent with the nonprofit and public interest nature of the Funds. EAEF hired companies to do an executive compensation study and to administer its human capital policies, including terms of recruitment, hiring, and employee benefits. While the Funds have generally met their obligations under the grant agreements, neither Fund has submitted the performance monitoring plans required under the grant agreements. USAID has also not tracked the Funds' use of cash in a way that allows the agency to monitor whether EAEF and TAEF are spending it in a timely manner. Further, EAEF has not implemented those provisions under the grant agreement related to marking and public communications. Last, the Funds' corporate policies do not include key vetting procedures to prevent the illicit use of funds, the presence of which was expected by USAID. EAEF and TAEF have to date generally complied with the requirements in the grant agreements. The grant agreements contain 22 discrete requirements with which each of the Funds must comply, such as submission of quarterly financial reports to USAID and annual reports to Congress on administrative expenses. As of December 2014, TAEF had fully complied with 21 of the 22 requirements, and EAEF had fully complied with 17 of the 22, as shown in table 2.submitted the required annual reports on administrative expenses. Additionally, both Funds submitted the required quarterly financial statements. EAEF and TAEF have not yet submitted performance monitoring plans as required by the grant agreements. Specifically, the grant agreements require the Funds to develop performance monitoring plans in consultation with USAID within 120 days after the grant agreement enters into force. However, as of February 2015, EAEF and TAEF performance monitoring plans were approximately 19 months and 15 months overdue, respectively. The performance monitoring plans are intended to allow external stakeholders and, for the purposes of oversight, USAID to monitor the Funds' progress toward meeting their goals. The grant agreements also require that the performance monitoring plans include performance indicators, which must include return on investment for U.S. capital invested in Egypt and Tunisia through the Funds and the number of SMEs in Egypt and Tunisia benefitting from Fund activities. USAID and the Funds are to review the performance monitoring plans and associated indicators during the semiannual meetings with USAID to assess progress. Without performance monitoring plans, USAID and other stakeholders cannot assess progress toward agreed-upon goals and indicators during the semiannual reviews. USAID referred the Funds to monitoring and evaluation experts to assist the Funds in developing their performance monitoring plans, according to USAID officials. The EAEF and TAEF Chairmen told us that it would have been premature to submit a performance monitoring plan before finalizing investment strategies. TAEF and EAEF officials told us that they are currently seeking contractors to develop and implement performance monitoring plans. In November 2014, TAEF issued a scope of work that envisioned a performance monitoring plan being presented to USAID 60 days after the Fund had selected and engaged a contractor. According to EAEF officials, EAEF plans to submit a performance monitoring plan to USAID in early 2015. USAID's grant agreements with EAEF and TAEF state that they may request funds for anticipated expenditures for up to a 90-day period from the date of the request. In addition, USAID guidance on advance payments states that, generally, advance payments or any portion of an advance payment not liquidated within 150 days is considered delinquent.documented rationale from the agreement officer and approved by USAID's financial management office. EAEF and TAEF have not liquidated some of their advances within 150 days of payment, and the advances were therefore delinquent. After we shared our preliminary findings with USAID, program officials sought and obtained the necessary approvals. As of November 2014, EAEF had an outstanding balance of Any exception to this general rule must be supported by a approximately $247,000, and TAEF had an outstanding advance balance of approximately $477,000. The Funds reported their liquidation of their advance payments through quarterly financial reports that are sent only to the USAID program representative. However, USAID's financial management office is responsible for monitoring whether the Funds' advances are outstanding. Because USAID's financial management office was not receiving the quarterly financial reports, it was unable to ensure that the Funds were not maintaining USAID funds in excess of their immediate disbursement needs. In commenting on a draft of this report, USAID stated that although not strictly required by agency policy, the program representative is now sharing all quarterly financial information with the financial management office to facilitate oversight. EAEF has not implemented the provisions in its grant agreement related to marking and public communications. Those provisions require the Fund to develop a logo in addition to using the USAID logo, to acknowledge USAID's role in the provision of foreign assistance, and to use a general disclaimer in those instances where it is unable to obtain USAID's approval in advance of a public communication. We have reported in the past that marking can raise awareness about the source of assistance with individuals who come into contact with the assistance sites or materials. According to USAID and EAEF officials, the two organizations are working together to see that the Fund implements these provisions. The grant agreements aim to prevent the contribution of U.S. funds (1) to certain individuals (e.g., individuals and organizations associated with terrorism) by conducting appropriate vetting, (2) for certain purposes (e.g., funds may not be used toward the purchase of gambling equipment), (3) to political organizations not committed to democracy, and (4) to the military of another government.direct organizations to establish control activities such as policies and procedures that enforce management directives and help ensure that Internal control standards actions are taken to address risks. We found that the Funds have accounted in their corporate policies for three out of the four prohibitions related to preventing the contribution of EAEF or TAEF funds to illicit transactions or purposes. While USAID grant agreements with the funds establish procedures designed to prevent transactions with individuals and organizations associated with terrorism, and the Chairmen of both Funds have committed to mitigate any risk of illicit use of U.S. funds, neither Funds' corporate policies contain specific vetting provisions. Specifically, they lack provisions related to vetting potential investees and the requirement that any investee planning to lend U.S. funds in excess of $25,000 onward to another business or invest in another entity certify to the Funds that it will conduct certain due diligence activities to prevent their illicit use. While USAID approved the Funds' corporate policies, USAID officials subsequently indicated that they expected this prohibition related to vetting potential investees and onward lending to be included in the Funds' corporate policies. Since the Funds have made only one investment to date--TAEF's $2.4 million investment--there has been only one instance where vetting was necessary. In commenting on a draft of this report, the TAEF Chairman emphasized that the Fund carried out all required due diligence with respect to vetting and assured itself of the appropriateness of the investee's procedures. For example, TAEF provided us with documentation of TAEF's efforts to screen the investee's primary officials against the required vetting lists as well as the investee's policy for verifying the credentials of individuals and firms. In addition, in November 2014, TAEF signed a side letter with the investee in which the investee agreed to screen all future recipients against lists of proscribed parties. Since their inception in 2013, EAEF and TAEF have been awarded $180 million by USAID and have made progress in establishing their administrative infrastructures, internal controls, corporate governance mechanisms, and investment strategies. To date, the Funds have disbursed approximately $2 million of the $180 million awarded to them and thus have a significant amount of U.S. funding available for future investments. The Funds have generally complied with the requirements in their grant agreements with USAID. For example, the Funds have submitted required financial reports to USAID and Congress. In addition, USAID and the Funds continue to take steps to improve oversight and compliance with the grant agreements. However, they have not yet completed actions to further strengthen oversight and compliance in several areas. In the area of cash management, USAID is exploring ways to ensure that it has all necessary financial information from the Funds, but it has not yet ensured that the Funds liquidate cash advances in a timely manner. In addition, while both Funds are hiring contractors to develop performance monitoring plans--for which both Funds required an extension of the original submission deadline--neither Fund has completed its performance monitoring plan. Further, EAEF has not yet complied with the provisions in the grant agreement related to public communications, such as those requiring EAEF to acknowledge the U.S. government's financial contribution. While both Funds have demonstrated their commitment to ensuring that U.S. funds are not used for prohibited purposes, neither Fund has incorporated vetting requirements for individuals and organizations into its corporate policies. Taking steps to address these remaining items would strengthen USAID oversight and the Funds' compliance with the grant agreements, which will be particularly important as the Funds' investments grow in number and size. To further enhance USAID's oversight of the Funds and to ensure the Funds fully implement the grant agreements, we recommend that the Administrator of USAID take the following four steps: 1. establish a process to better manage cash advances to the Funds, 2. make certain that the Funds comply with grant agreement requirements related to performance monitoring, 3. ensure that the Funds comply with grant agreement requirements related to public communications, and 4. ensure that the Funds' corporate policies reflect grant agreement provisions regarding vetting requirements designed to prevent transactions with prohibited individuals and organizations. We provided a draft of this report to USAID, the Department of State (State), EAEF, and TAEF for review and comment. USAID and TAEF provided written comments, which we have reprinted in appendixes II and III, respectively. State provided technical comments, which we incorporated as appropriate. In its written comments, reprinted in appendix II, USAID concurred with our four recommendations and indicated the steps it was taking to implement each of them. Specifically, regarding our recommendation to establish a process to better manage cash advances, USAID stated that going forward the program representative would share Fund quarterly financial reports with the office of the Chief Financial Officer. In response to our recommendation pertaining to performance monitoring, USAID stated that it would work with each Fund to meet a revised deadline of the first quarter of 2015 to submit a completed performance monitoring plan. With regard to our recommendation pertaining to public communications, EAEF confirmed to USAID that it would meet all related requirements going forward, including proposing a logo in the first quarter of 2015. Lastly, the Chairmen of both Funds confirmed to USAID that they would propose amendments to their corporate policies to include the vetting procedures to their respective Boards. In its written comments, reprinted in appendix III, TAEF agreed with our findings and provided some additional information. For example, TAEF stated that the delay it requested to implement its performance monitoring plan would result in more timely and better program evaluation going forward. We are sending copies of this report to the appropriate congressional committees, State, USAID, and EAEF and TAEF. 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 David Gootnick 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 members who made key contributions to this report are listed in appendix IV. Conferees for the bill that would become the Consolidated Appropriations Act, 2012 (Pub.L. No. 112-74) requested that we examine the management and oversight of the Egyptian-American Enterprise Fund (EAEF) and the Tunisian-American Enterprise Fund (TAEF) (the Funds) to determine if appropriate and sufficient safeguards exist against financial misconduct. In this report, we examined (1) the status of EAEF's and TAEF's investments, (2) EAEF's and TAEF's progress in establishing key management structures to support their missions and operations, and (3) the extent to which EAEF and TAEF have complied with certain requirements of the USAID grant agreements. To assess the extent to which the Funds have made investments, we reviewed the Funds' strategic planning documents and their due diligence reports. We obtained budget data from the U.S. Agency for International Development (USAID) on its obligations and disbursements to the Funds from fiscal years 2013 to 2014. We conducted an assessment of the reliability of the data by reviewing USAID's responses to a set of data reliability questions and by interviewing USAID budget officials. We found the data to be sufficiently reliable for our purposes. In addition, we interviewed the Chairmen and senior management of EAEF and TAEF to discuss their investment strategies, plans, and investment efforts thus far. To examine what progress the Funds have made in establishing key management structures, we reviewed EAEF and TAEF documents, including the Funds' statements of corporate policies and procedures, bylaws, employee job descriptions, organization charts, financial and annual reports, and board of director meeting minutes. We used the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Internal Control - 2013 Integrated Framework evaluation tool as a framework for gathering information on the Funds' management structures and assessing the extent to which they had established such Although our analysis included gaining an understanding of structures.EAEF's and TAEF's actions related to establishing internal control mechanisms, we did not evaluate the implementation of internal control at the Funds. We also interviewed EAEF and TAEF Chairmen and senior management to obtain information on the management structures the Funds had already established or planned to establish. To assess the extent of Fund compliance with certain grant agreement requirements, we used the EAEF and TAEF grant agreements as our primary criteria for identifying the requirements to which the Funds are subject. We identified 22 requirements that the Funds are subject to and then determined whether the Funds had met these requirements by collecting relevant USAID and Fund documentation, such as the Funds' reports to Congress on administrative expenses. We also reviewed the Funds' statement of corporate policies and procedures and documentation related to the Funds' efforts to develop performance monitoring plans. In addition, we interviewed the EAEF and TAEF Chairmen and senior management about their efforts to comply with the terms and conditions of the grant agreements as well as USAID officials regarding their efforts to oversee the Funds' compliance with the grant agreements. We also examined the process that USAID used to develop the EAEF and TAEF grant agreements, which entailed reviewing its agency policies, procedures for deviating from those policies, and the grant agreements themselves. We conducted this performance audit from March 2014 to February 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Jason Bair (Assistant Director), R. Gifford Howland (Analyst-in-Charge), Debbie Chung, Emily Gupta, and Jeffrey Isaacs made key contributions to this report. Mark Dowling, Etana Finkler, Paul Kinney, and Steven Putansu provided additional support.

Summary:
In the wake of the economic and political transitions associated with the "Arab Spring," Congress authorized the creation of enterprise funds for Egypt and Tunisia in 2011. EAEF and TAEF aim to develop the private sectors in these countries, particularly SMEs, through instruments such as loans, equity investments, and technical assistance. USAID signed grant agreements with both Funds in 2013 and has thus far obligated $120 million to EAEF and $60 million to TAEF. In this report, GAO examines (1) the status of the Funds' investments, (2) the Funds' progress in establishing key management structures to support their missions and operations, and (3) the extent to which the Funds have complied with requirements in the grant agreements. To address these objectives, GAO reviewed USAID and Fund documents, such as EAEF and TAEF grant agreements, policies and procedures, and the Funds' boards of directors meeting minutes. GAO also interviewed USAID and Fund officials. The Egyptian-American Enterprise Fund (EAEF) has not yet made any investments in Egypt, and the Tunisian-American Enterprise Fund (TAEF) has made an over $2.4 million investment in Tunisia. EAEF has not made any investments in Egypt as its initial investment did not proceed as planned. EAEF's attempt to purchase a bank in Egypt that would lend money to small and medium-sized enterprises (SME) was rejected by the Egyptian Central Bank. EAEF is now considering other options, such as investments in the food and beverage sector. TAEF's investment strategy is to invest in four different areas: (1) a private equity fund investing in SMEs, (2) direct investments in SMEs smaller than those targeted by the private equity fund, (3) microfinance institutions, and (4) start-ups. In June 2014, TAEF made an over $2.4 million investment in a private equity fund that invests in and finances Tunisian SMEs. EAEF and TAEF (the Funds) have made progress in establishing key management structures to support their mission and operations, with additional actions under way. In terms of administrative structures, both Funds have hired initial staff. Regarding their corporate governance, EAEF and TAEF both have boards of directors that have met regularly, adopted by-laws, and developed corporate policies and procedures. Both Funds plan to develop and implement additional management structures in the future, such as audits of their 2013 and 2014 financial statements. While TAEF and EAEF have generally fulfilled the requirements of the grant agreements, GAO found three gaps in the Funds' implementation and one gap in the U.S. Agency for International Development's (USAID) implementation. First, the Funds have not yet submitted their performance monitoring plans as required by the grant agreements. Second, EAEF has not implemented the provisions in its grant agreement related to public communications, such as development of its own logo. Third, the Funds' corporate policies do not include procedures to implement vetting requirements designed to prevent illicit use of the funds, the presence of which was expected by USAID. USAID has also not tracked the Funds' use of cash in a way that allows the agency to monitor whether EAEF and TAEF are spending it in a timely manner. Collectively, these gaps in implementation pose challenges for USAID's oversight of the Funds. GAO recommends that USAID take steps to further enhance its oversight of the Funds' compliance with the grant agreements and other requirements by establishing a process to better manage cash advances to the Funds; ensuring that the Funds comply with the grant agreement requirements related to performance monitoring and public communications; and ensuring that the Funds' corporate policies include vetting requirements. USAID concurred with our recommendations.