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United States Government Accountability Office: 
GAO:  

Report to the Chairman, Committee on Foreign Relations, U.S. Senate:  

January 2013:  

Cuba Democracy Assistance:  

USAID's Program Is Improved, but State Could Better Monitor Its 
Implementing Partners:  

GAO-13-285:  

GAO Highlights:  

Highlights of GAO-13-285, a report to the Chairman, Committee on 
Foreign Relations, U.S. Senate.  

Why GAO Did This Study:  

Since 1996, Congress has appropriated $205 million to USAID and State 
to support democracy assistance for Cuba. Because of Cuban government 
restrictions, conditions in Cuba pose security risks to the 
implementing partners-—primarily NGOs-—and subpartners that provide 
U.S. assistance.  

For this report, GAO (1) identified current assistance, implementing 
partners, subpartners, and beneficiaries; (2) reviewed USAID’s and State
’s efforts to implement the program in accordance with U.S. laws and 
regulations and to address program risks; and (3) examined USAID’s and 
State’s monitoring of the use of program funds. This report is a 
publicly releasable version of a Sensitive But Unclassified Report 
that GAO issued in December 2012.  

To address these objectives, GAO analyzed program activities and 
funding, relevant laws and regulations, and practices for monitoring 
the use of funds. GAO also conducted performance and financial reviews 
of a nongeneralizable sample of six implementing partners-—
representing about 60 percent of USAID and State funding for awards 
and contracts active in fiscal year 2011-—and 11 subpartners.  

What GAO Found:  

The U.S. Agency for International Development (USAID) and Department 
of State (State) provide democracy assistance for Cuba aimed at 
developing civil society and promoting freedom of information. Typical 
program beneficiaries include Cuban community leaders, independent 
journalists, women, youths, and marginalized groups. USAID receives 
the majority of funding allocated for this assistance, although State 
has received 32 percent of funding since 2004. In recent years, both 
USAID and State have provided more funding for program implementation 
to for-profit and nongovernmental organizations (NGO) with a worldwide 
or regional focus than to universities and to NGOs that focus only on 
Cuba. All types of implementing partners, but worldwide or regional 
organizations in particular, used subpartners to implement program 
activities under 21 of the 29 awards and contracts that GAO reviewed.  

USAID and State legal officials view the Cuba democracy program’s 
authorizing legislation as allowing the agencies discretion in 
determining the types of activities that can be funded with program 
assistance. Agency officials added that the agencies ensure that 
program activities directly relate to democracy promotion as broadly 
illustrated in related program legislation. The officials stated that 
organizations are expected to work with agency program officers to 
determine what activities are permitted or appropriate. In addition, 
they said that program partners and subpartners are expected to spend 
U.S. government funds consistent with U.S. laws, and that requirements 
in primary award agreements generally flow down to any subpartners.  

USAID has improved its performance and financial monitoring of 
implementing partners’ use of program funds by implementing new 
policies and hiring contractors to improve monitoring and evaluation 
and to conduct financial internal controls reviews, but GAO found gaps 
in State’s financial monitoring. While GAO found some gaps in 
implementing partners’ performance planning and reporting, both 
agencies are taking steps to improve performance monitoring. For 
financial monitoring, USAID performs financial internal controls 
reviews of its implementing partners with the assistance of an 
external auditor. Since 2008, USAID has used a risk-based approach to 
determine the coverage and frequency of the 30 reviews the auditor has 
conducted, which have identified weaknesses in implementing partners’ 
financial management, procurement, and internal controls. However, 
because of resource constraints, State did not perform financial 
internal controls reviews for more than two-thirds of its implementing 
partners during fiscal years 2010 through 2012. State procured an 
external financial auditor in September 2012 that plans to review more 
than half of State’s implementing partners, and has taken steps toward 
implementing a risk-based approach for scheduling these reviews. 
Federal regulations generally require agencies to approve the use of 
subpartners. GAO found that USAID issued specific guidance in 2011 to 
its implementing partners on requirements for subpartner approval. 
While State told GAO it has similar requirements, State’s requirements 
are not clearly specified in its written guidance. As a result, State 
was not provided with the information it would have needed to approve 
at least 91 subawards and subcontracts that were obligated under eight 
awards.  

What GAO Recommends:  

GAO is recommending that State take steps to improve its financial 
monitoring of implementing partners and provide clear guidance for 
approving subpartners. State concurred with GAO’s recommendations and 
cited steps they are taking to address them.  

View [hyperlink, http://www.gao.gov/products/GAO-13-285]. For more 
information, contact David Gootnick at (202) 512-3149 or 
gootnickd@gao.gov.  

[End of section]  

Contents:  

Letter:  

Background:  

USAID and State Focus on Promoting Cuban Civil Society and Access to 
Information; Most Funding Goes to Worldwide or Regional Partners and 
Their Subpartners:  

Agencies Exercise Discretion under Authorizing Legislation in Funding 
Cuba Program Activities:  

USAID Has Improved Its Monitoring of Partners; State's Monitoring Does 
Not Ensure Program Funds Are Used as Intended:  

Conclusions:  

Recommendations for Executive Action:  

Agency Comments and Our Evaluation:  

Appendix I: Objectives, Scope, and Methodology:  

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

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

Appendix IV: GAO Contact and Staff Acknowledgments:  

Tables:  

Table 1: Key USAID and State Roles and Responsibilities for Cuba 
Democracy Assistance:  

Table 2: Cuba Democracy Assistance Provided from Fiscal Years 2009 to 
2011:  

Table 3: Characteristics of Partners' Performance Planning and 
Reporting for Selected USAID Awards and Contracts:  

Table 4: Characteristics of Partners' Performance Planning and 
Reporting for Selected State Awards:  

Table 5: Selected USAID and State Implementing Partners:  

Figures:  

Figure 1: Cuba Democracy Funding Allocations to USAID and State from 
Appropriations for Fiscal Years 1996-2011:  

Figure 2: Characteristics of USAID and State Cuba Democracy Assistance 
Implementing Partners and Their Awards and Contracts, Fiscal Years 
1996-2012:  

Figure 3: Number of Active USAID and State Awards and Contracts for 
Cuba Democracy Assistance, by Type of Organization, Fiscal Years 1996-
2012:  

Abbreviations:  

DRL: Bureau of Democracy, Human Rights, and Labor:  

LAC: Latin American and Caribbean Bureau:  

M/E: Monitoring and evaluation:  

NED: National Endowment for Democracy:  

NGO: Nongovernmental organization:  

OMB: Office of Management and Budget:  

OTI: Office of Transition Initiatives:  

Partner: Implementing partner:  

RFA: Request for Application:  

RFP: Request for Proposal:  

State: Department of State:  

USAID: United States Agency for International Development:  

USINT: U.S. Interests Section in Havana, Cuba:  

WHA: Bureau of Western Hemisphere Affairs:  

[End of section]  

United States Government Accountability Office: 
Washington, DC 20548:  

January 25, 2013:  

The Honorable John F. Kerry: 
Chairman: 
Committee on Foreign Relations: 
United States Senate:  

Dear Mr. Chairman:  

The U.S. Agency for International Development (USAID) and the 
Department of State (State) provide assistance to increase respect for 
human rights and fundamental freedoms, strengthen independent Cuban 
civil society, and foster greater access to independent information on 
the island.[Footnote 1] Cubans have lived under an authoritarian 
regime for more than 50 years; in that time, Cubans have faced 
continuous restrictions in citizens' rights to organize, express 
themselves freely, and participate in political life without fear of 
being harassed and repressed by the Cuban government. Conditions in 
Cuba pose risks and challenges for the delivery of program assistance 
on the island, which is largely provided by implementing partners 
(partners) and their subpartners.[Footnote 2] In fiscal years 1996 
through 2011, Congress appropriated $205 million for Cuba democracy 
assistance, with about 90 percent of program funding provided since 
fiscal year 2004. While USAID has received most of this funding, State 
has also received program funding allocations since fiscal year 2004. 

In November 2006 and November 2008, we reported problems with USAID's 
management and oversight of its Cuba program, such as oversight 
weaknesses that increased the risk of grantees' improper use of grant 
funds and noncompliance with U.S. laws and regulations.[Footnote 3] We 
made several recommendations to help USAID strengthen its program 
management and monitoring, including recommendations to improve the 
timeliness of preaward reviews, and to ensure partners develop 
approved implementation plans for awards. USAID has reported taking 
several steps to address the recommendations. However, security risks 
and challenges related to the delivery of program assistance persist. 

To respond to your request, this report focuses on USAID's and State's 
efforts to provide democracy assistance for Cuba. We (1) identified 
the types and amounts of assistance that USAID and State have 
provided, as well as characteristics of their partners, subpartners, 
and program beneficiaries; (2) reviewed USAID's and State's efforts to 
implement the program in accordance with U.S. laws and regulations and 
to address program risks; and (3) examined USAID's and State's 
monitoring of the use of program funds. This report is a publicly 
releasable version of a prior GAO report, issued in December 2012, 
that USAID and State had designated Sensitive But Unclassified. 
Although the information provided in this report is more limited in 
scope, it addresses the same questions and uses the same overall 
methodology as the sensitive report. 

In conducting this review, we identified all awards and contracts 
funded from 1996 to 2012 and analyzed selected characteristics of all 
22 USAID and State partners that received program funding from fiscal 
years 2007 to 2009 appropriations and were active in fiscal year 2011. 
These partners received 29 awards and contracts during that period. We 
reviewed relevant U.S. laws and regulations and agency and 
departmental policies and procedures, and we interviewed USAID and 
State officials regarding program implementation and related risks. We 
also analyzed reported activities, assistance delivered, and 
management and internal controls[Footnote 4] for a nonprobability, 
[Footnote 5] nongeneralizable sample of six USAID and State partners 
and 11 of their subpartners, to assess performance and financial 
monitoring and oversight of their awards and contracts. We selected at 
least one partner from each of the four USAID and State bureaus and 
offices implementing program assistance. The six selected partners 
were among the top 15 recipients of program funding awarded in fiscal 
years 2007 through 2010 and represented about 60 percent of funding 
for awards active in fiscal year 2011. These six partners received 10 
USAID and State awards and contracts over the time period we reviewed--
five from USAID and five from State. We reviewed and analyzed 
performance and financial documentation and data and conducted 
interviews with USAID and State officials and with representatives of 
partners and subpartners in our sample. In addition, we conducted 
fieldwork in Miami, Florida, where we interviewed representatives and 
reviewed documentation at local partners and subpartners, and at the 
U.S. Interests Section (USINT) in Havana, Cuba, where we interviewed 
U.S. officials and observed activities at post.[Footnote 6] Appendix I 
provides further details on our scope and methodology. 

We conducted this performance audit from September 2011 to January 
2013 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. 

Background:  

Challenges Affecting Cuba Democracy Assistance:  

Conditions in Cuba continue to pose substantial challenges for U.S. 
assistance. Cuba is a Communist state that restricts nearly all 
political dissent on the island; tactics for suppressing dissent in 
Cuba include surveillance, arbitrary arrests, detentions, travel 
restrictions, exile, criminal prosecutions, and loss of employment. 
Furthermore, there is no free press in Cuba, and independent 
journalists and activists are harassed and imprisoned. The Cuban 
government substantially restricts and controls the flow of 
information, limiting access to the Internet, cell phones, radio 
antennas, and other items, and restricting their use through high 
costs, punitive laws, and the threat of confiscation. Moreover, the 
government routinely jams all external, non-Cuban broadcasts, 
including the U.S. government-supported Radio and TV Martí broadcasts. 

The United States, which maintains an embargo on most trade with Cuba, 
does not have diplomatic relations with the Cuban government. 
Consequently, USAID does not work cooperatively or collaboratively 
with Cuban government agencies, as it does in most other countries 
receiving U.S. democracy assistance. USAID does not have staff in 
Cuba, and State does not have staff dedicated to the Cuba democracy 
program in Havana.[Footnote 7] USAID and State program staff have been 
unable to obtain visas to visit Cuba over the past decade, which poses 
challenges for program implementation, monitoring, and evaluation. In 
addition, Cuban law prohibits citizens from cooperating with U.S. 
democracy assistance activities. In December 2009, a subcontractor 
working for one of USAID's partners was arrested in Cuba while 
delivering computer equipment to provide Internet access to Jewish 
communities on the island. He was subsequently sentenced to 15 years 
in prison for "acts against the independence or the territorial 
integrity of the state."  

Roles and Responsibilities for Implementing Cuba Democracy Assistance:  

Several USAID and State bureaus and offices implement Cuba democracy 
assistance efforts, including soliciting proposals, competitively 
awarding funds, and monitoring program implementation. 

* USAID:  

- The Latin American and Caribbean Bureau (LAC), Office of Cuban 
Affairs, is chiefly responsible for implementing Cuba democracy 
assistance efforts. 

- The Management Bureau has various offices that also assist in 
overseeing program awards and contracts. 

- The Office of Transition Initiatives (OTI) oversaw implementation of 
a single contract from fiscal years 2009 through 2012. OTI's Cuba 
program efforts were envisioned from their inception to be temporary, 
as is typically the case with OTI's programs, which generally aim to 
provide short-term assistance. 

* State:  

- The Bureau of Democracy, Human Rights, and Labor (DRL) is 
responsible for managing and overseeing the majority of State's Cuba 
democracy assistance program activities. 

- The Bureau of Western Hemisphere Affairs (WHA), including the U.S. 
Interests Section in Havana, Cuba, (USINT), also manages and oversees 
Cuba program activities.  

- The Bureau of Administration assists DRL and WHA in the financial 
management and oversight of Cuba democracy assistance awards.[Footnote 
8] 

Reporting on Cuba democracy assistance in 2006,[Footnote 9] we found 
that USINT delivered some assistance to independent groups and 
individuals in Cuba, including assistance provided by USAID-and State-
funded awardees. Because of heightened security concerns, USINT no 
longer has a role in implementing assistance for USAID and State/DRL 
partners. However, USINT continues to provide information on 
conditions in Cuba, facilitates and assists with State/WHA training 
courses, and supports civil society in Cuba. 

Table 1 outlines key USAID and State roles and responsibilities for 
providing U.S. democracy assistance for Cuba. 

Table 1: Key USAID and State Roles and Responsibilities for Cuba 
Democracy Assistance:  

USAID:  

Responsible entity: LAC, Office of Cuban Affairs; 
Staff roles/responsibilities: A Director, four Program Managers, a 
Budget Analyst, and an Administrative Assistant share full-time 
responsibilities for program management and oversight. These 
responsibilities include program design, implementation, and 
monitoring as well as budgeting and financial management.  

Responsible entity: Management Bureau; 
Staff roles/responsibilities: Various staff members assist in program 
oversight, including closing out awards and contracts, conducting risk 
assessments, and auditing programs.  

Responsible entity: OTI; 
Staff roles/responsibilities: A Country Representative dedicated full-
time to Cuba and a part-time Deputy Team Leader shared 
responsibilities for all aspects of the temporary program's management 
and oversight through the end of program efforts in fiscal year 2012.  

State:  

Responsible entity: DRL; 
Staff roles/responsibilities: Two Program Officers share part-time 
responsibilities for Cuba program planning, implementation, monitoring 
and evaluation. A Foreign Affairs Officer also provides part-time 
assistance, primarily on policy issues related to Cuba.  

Responsible entity: WHA; 
Staff roles/responsibilities: About a dozen staff members each spend 
about 5 to 10 percent of their time on Cuba program management and 
oversight.  

Responsible entity: USINT, Havana; 
Staff roles/responsibilities: Several staff, dedicated part-time to 
providing information on conditions in Cuba, facilitate and assist 
with State/WHA training courses and support civil society in Cuba.  

Responsible entity: Bureau of Administration; 
Staff roles/responsibilities: Various staff members are responsible 
for financial oversight and providing financial management guidance to 
DRL and WHA Cuba program partners.  

Source: GAO analysis of USAID, State, and other records.  

[End of table]  

In addition, the National Endowment for Democracy (NED), an 
independent, nongovernmental organization, funds programs to promote 
democracy in Cuba through both direct congressional appropriations and 
with funding that it receives through State/DRL.[Footnote 10] 

Program partners--such as nongovernmental organizations, universities, 
and development contractors--and subpartners also have roles and 
responsibilities for Cuba democracy program assistance. USAID and 
State provide funding for partners through various mechanisms, 
including grants and cooperative agreements (together referred to as 
"awards" in this report) and contracts. Partners may also award 
funding to subpartners to assist them in implementing program efforts. 
Subpartners may include consultants, subcontractors, subgrantees, and 
recipients of grants under contract. 

USAID and State Focus on Promoting Cuban Civil Society and Access to 
Information; Most Funding Goes to Worldwide or Regional Partners and 
Their Subpartners:  

USAID and State support democracy for Cuba by providing awards and 
contracts to partners with objectives related to developing civil 
society and promoting freedom of information. USAID receives the 
majority of funding allocated for this assistance, although State has 
received 32 percent of funding since it started taking part in the 
program in 2004. Since 2008, USAID and State have awarded more funds 
to larger organizations with a worldwide or regional presence than to 
the other two categories of typical awardees: universities, and 
smaller organizations that focus only on Cuba. Under 21 of the 29 
recent awards and contracts that we reviewed, partners used 
subpartners to implement program activities and obligated about 40 
percent of the funding associated with these awards and contracts to 
subpartners. Worldwide or regional organizations provided more than 90 
percent of the funding provided to subpartners. 

Program Focuses on Promoting Civil Society and Access to Information:  

USAID's and State's democracy assistance efforts for Cuba generally 
focus on developing an independent civil society and promoting freedom 
of information in Cuba. The overall goal and guiding principle of U.S. 
democracy assistance for Cuba is to improve the effectiveness of 
citizens to participate in activities affecting their lives and to 
increase access to information.[Footnote 11] Efforts to develop Cuban 
civil society include training in organizational and community 
development, leadership, and advocacy. Related material assistance may 
include the provision of books, pamphlets, movies, music, and other 
materials that promote democratic values. In addition, efforts to 
promote freedom of information have included the following, among 
other activities:  

* information technology training for Cuban nationals, ranging from 
basic computing to blogging; 

* journalism training; 

* support for independent publications; and:  

* provision of material assistance. 

USAID and State officials noted that in recent years, program efforts 
have included a greater focus on information technology, particularly 
on supporting independent bloggers and developing social networking 
platforms on the island. 

Several partners we reviewed received funding to support international 
solidarity activities, although agency and partner officials indicated 
that the program recently has reduced its focus on off-island 
activities to foster support for democracy in Cuba. Activities of this 
type that State/DRL funded in fiscal years 2009 through 2011 included 
the following:  

* an essay contest for Latin American youths related to Cuba 
Solidarity Day, and:  

* exhibits and documentaries presented outside Cuba for the purpose of 
bringing awareness globally to Cuban human rights issues and civil 
society development. 

In recent years, USAID and State had few awards or contracts focused 
solely on such humanitarian assistance as assistance for political 
prisoners and their families, according to agency officials. USINT 
officials noted that humanitarian assistance has declined along with a 
decrease in the number of political prisoners in Cuba.[Footnote 12] 
Officials added that USINT itself no longer provides any humanitarian 
assistance on the island. 

To broaden reach and impact, Cuba democracy assistance efforts have 
expanded beyond a focus on traditional activists to include groups 
such as poor and rural communities, religious organizations, small 
businesses, and information technology enthusiasts. Typical program 
beneficiaries also include Cuban community leaders, independent 
journalists, independent bloggers, women, and youths. 

Table 2 summarizes information on recent program assistance and target 
beneficiaries. 

Table 2: Cuba Democracy Assistance Provided from Fiscal Years 2009 to 
2011:  

Purpose of assistance: Development of independent civil society; 
Examples of assistance provided: 
* Training on topics such as democracy building, economic rights, free 
markets, leadership and advocacy, organizational and community 
development, conducting small projects, and human rights abuse 
response and documentation; 
* Books, pamphlets, and other materials to promote democratic values; 
* Support for the development of independent social networking 
platforms; 
* Technical and material assistance to increase awareness of freedom 
of expression; 
Target beneficiaries: Community leaders; Cuban youths and students, 
girls and women, poor and rural communities; Other groups. 

Purpose of assistance: Promotion of freedom of information; 
Examples of assistance provided: 
* Information technology training, such as basic computing, Internet, 
and blogging; 
* Journalism training; 
* Digital newspaper publication to disseminate work of independent 
journalists; 
* Development and distribution of media content for youth; 
* Digital photo contest; 
* Shortwave independent radio station; 
* Material assistance; 
Target beneficiaries: Cuban public; Independent Cuban journalists; 
Cuban youths. 

Purpose of assistance: Humanitarian assistance; 
Examples of assistance provided: 
* Food products, over-the-counter medication, basic clothing; 
* Financial aid for family members of political prisoners; 
* Material assistance for civil society organizations targeting 
political prisoners and their families; 
Target beneficiaries: Political prisoners and their families. 

Source: GAO analysis of USAID, State, and other records.  

[End of table]  

USAID Has Received the Majority of Allocations, but State's Portion 
Has Grown in Recent Years:  

In fiscal years 1996 through 2011, Congress appropriated $205 million 
for Cuba democracy assistance, appropriating 87 percent of these funds 
since 2004. Increased funding for Cuba democracy assistance was 
recommended by the interagency Commission for Assistance to a Free 
Cuba, which was established by President George W. Bush in 2003. 
[Footnote 13] Program funding, which peaked in 2008 with 
appropriations totaling $44.4 million, has ranged between $15 and $20 
million per year during fiscal years 2009 through 2012. For fiscal 
year 2013, USAID and State reduced their combined funding request to 
$15 million, citing operational challenges to assistance efforts in 
Cuba.[Footnote 14] 

In fiscal years 1996 through 2011, $138.2 million of Cuba democracy 
funds were allocated to USAID and $52.3 million were allocated to 
State (see figure 1).[Footnote 15] 

Figure 1: Cuba Democracy Funding Allocations to USAID and State from 
Appropriations for Fiscal Years 1996-2011:  

[Refer to PDF for image: stacked vertical bar graph]  

Fiscal year: 1996: 
USAID/LAC: $0.5 million.  

Fiscal year: 1997: 
USAID/LAC: $1.415 million.  

Fiscal year: 1998: 
USAID/LAC: $2 million.  

Fiscal year: 1999: 
USAID/LAC: $3.5 million.  

Fiscal year: 2000: 
USAID/LAC: $3.5 million.  

Fiscal year: 2001: 
USAID/LAC: $4.989 million.  

Fiscal year: 2002: 
USAID/LAC: $5 million.  

Fiscal year: 2003: 
USAID/LAC: $6 million.  

Fiscal year: 2004: 
USAID/LAC: $21.369 million; 
State/DRL: $5.41 million.  

Fiscal year: 2005: 
USAID/LAC: $8.928 million; 
State/DRL: $8.1 million.  

Fiscal year: 2006: 
USAID/LAC: $10.894 million; 
State/DRL: $4.5 million.  

Fiscal year: 2007: 
USAID/LAC: $6.195 million; 
USAID/OTI: $2.477 million; 
State/DRL: $5.605 million.  

Fiscal year: 2008: 
USAID/LAC: $22.708 million; 
USAID/OTI: $7.6 million; 
State/DRL: $9.301 million; 
State/WHA: $1.815 million.  

Fiscal year: 2009: 
USAID/LAC: $8.32 million; 
USAID/OTI: $2.25 million; 
State/DRL: $3.9 million; 
State/WHA: $1.15 million.  

Fiscal year: 2010: 
USAID/LAC: $9.648 million; 
USAID/OTI: $2 million; 
State/DRL: $4.457 million; 
State/WHA: $0.925 million.  

Fiscal year: 2011: 
USAID/LAC: $8.9 million; 
State/DRL: $5.5 million; 
State/WHA: $1.6 million.  

Source: GAO analysis of USAID and State data.  

Note: The fiscal year 2012 appropriations for Cuba democracy funding 
have not yet been allocated between the USAID and State bureaus. Since 
1984, through its congressional appropriation, NED has also provided 
democracy assistance to Cuba ranging from $0 to $1.4 million annually 
from 2006 to 2010. In addition, since 2005, State/DRL has transferred 
funding to NED for Cuba democracy assistance that has totaled $14.4 
million and has ranged from $0 to $4 million annually.  

[End of figure]  

When the Cuba democracy program began in 1996, USAID was the only 
agency involved and USAID/LAC was the only programming bureau. 

* USAID/LAC has received the largest total amount of program funding 
and has continued to receive the largest annual amount, averaging 
$12.1 million annually since fiscal year 2004. 

* USAID/OTI received program funding totaling $14.3 million from the 
appropriations for fiscal years 2007 through 2010.[Footnote 16] 

State has received 32 percent of Cuba democracy funding since fiscal 
year 2004. 

* State/DRL has received an average of $5.8 million annually since 
fiscal year 2004.[Footnote 17] 

* State/WHA has received an average of $1.4 million annually since 
fiscal year 2008. 

USAID and State Have Provided Most Recent Awards and Contracts to 
Worldwide or Regional Organizations:  

USAID and State have awarded funding for Cuba democracy assistance to 
three categories of partners: (1) Cuba-specific nongovernmental 
organizations (NGO), (2) worldwide or regional organizations, and (3) 
universities.[Footnote 18] 

USAID's and State's awards and contracts tended to share certain 
characteristics, such as their broad objectives and amounts awarded, 
depending on the type of partner. 

* Objectives. USAID and State awards and contracts to Cuba-specific 
NGOs and to worldwide or regional organizations have generally funded 
similar types of program activities, such as efforts to provide 
training and material assistance on the island. Awards to universities 
have tended to have different objectives. In the early years of the 
Cuba program, awards to universities funded activities such as 
research on how to promote a democratic transition in Cuba and 
scholarships to study at universities in the United States. Since the 
mid-2000s, after finding that the Cuban government would not provide 
exit visas for Cuban students to study in the United States, USAID and 
State have awarded funding to universities largely for programs to 
provide distance learning training to Cubans on the island or courses 
at universities in other Latin American countries. 

* Amount of award or contract. USAID's awards and contracts in fiscal 
years 1996 through 2012 averaged $1.9 million for Cuba-specific NGOs, 
and $2.1 million for worldwide or regional organizations. State's 
awards and contracts averaged $0.8 million for Cuba-specific NGOs and 
$0.9 million for worldwide or regional organizations. Both USAID's and 
State's awards and contracts to universities averaged $0.8 million. 

In fiscal years 1996 through 2012, USAID and State had a combined 
total of 111 awards and contracts to 51 partners representing all 
three types of organizations (see figure 2). Many of the awards were 
concentrated among certain partners, with 25 of these partners 
receiving multiple awards from USAID, State, or both. For example, one 
partner received a combined 11 awards from USAID and State, more than 
any other partner, and 10 of the 51 partners received 67 percent of 
total funding to partners.[Footnote 19] 

Figure 2: Characteristics of USAID and State Cuba Democracy Assistance 
Implementing Partners and Their Awards and Contracts, Fiscal Years 
1996-2012:  

[Refer to PDF for image: 9 vertical bar graphs]  

Number of implementing partners[A]:  

Cuba-specific organization; 
USAID: 14; 
State: 5; 
Total: 16.  

Worldwide or regional organization; 
USAID: 18; 
State: 15; 
Total: 26.  

University; 
USAID: 8; 
State: 2; 
Total: 9.  

Number of awards and contracts:  

Cuba-specific organization; 
USAID: 22; 
State: 11; 
Total: 33.  

Worldwide or regional organization; 
USAID: 29; 
State: 32; 
Total: 61.  

University; 
USAID: 15; 
State: 2; 
Total: 17.  

Amount of awards and contracts:  

Cuba-specific organization; 
USAID: $42.0 million; 
State: $9.3 million; 
Total: $51.3 million.  

Worldwide or regional organization; 
USAID: $60.5 million; 
State: $28.7 million; 
Total: $89.3 million[B].  

University; 
USAID: $12.8 million; 
State: $1.6 million; 
Total: $14.4 million.  

Source: GAO analysis of USAID and State records.  

[A] The sum of USAID's and State's implementing partners exceeds the 
total for each type of organization because 11 implementing partners, 
across the different types of organizations, received awards from both 
USAID and State. 

[B] Difference in sum of subtotals and total is due to rounding.  

[End of figure]  

Since fiscal year 2008, regional or worldwide organizations have had 
more active USAID and State awards and contracts each year, and have 
received more funding, than Cuba-specific NGOs or universities. Prior 
to 2008, Cuba-specific NGOs had more active USAID awards than the 
other categories of recipients in most years. However, the program's 
partners have consistently included worldwide or regional 
organizations, some of which have a history of working on Cuba issues 
(see figure 3). For example, for awards that began in fiscal years 
1996 through 2007, Cuba-specific NGOs received 48 percent of award 
funding, worldwide or regional organizations received 43 percent, and 
universities received 9 percent. In contrast, for awards made since 
fiscal year 2008, worldwide or regional organizations received 74 
percent of award and contract funding, while Cuba-specific NGOs 
received almost 17 percent, and universities received almost 10 
percent. As we previously reported, this greater use of worldwide or 
regional organizations, which began in 2008, reflected more formal 
requirements for submitting proposals and USAID's decision to fund 
awards and contracts that incorporate capacity building for 
subpartners as an important element.[Footnote 20] 

Figure 3: Number of Active USAID and State Awards and Contracts for 
Cuba Democracy Assistance, by Type of Organization, Fiscal Years 1996-
2012:  

[Refer to PDF for image: vertical bar and line graph]  

Number of awards/contracts:  

Fiscal year: 1996;
Awards/contracts to worldwide or regional organizations: 
USAID: 1; 
Total awards/contracts from USAID and State: 1.  

Fiscal year: 1997; 
Awards/contracts to worldwide or regional organizations: 
USAID: 3; 
Total awards/contracts from USAID and State: 3.  

Fiscal year: 1998; 
Awards to universities: 
USAID: 2; 
Awards/contracts to worldwide or regional organizations: 
USAID: 6; 
Awards to Cuba Specific NGO's: 
USAID: 4; 
Total awards/contracts from USAID and State: 12.  

Fiscal year: 1999; 
Awards to universities: 
USAID: 3; 
Awards/contracts to worldwide or regional organizations: 
USAID: 6; 
Awards to Cuba Specific NGO's: 
USAID: 8; 
Total awards/contracts from USAID and State: 17.  

Fiscal year: 2000; 
Awards to universities: 
USAID: 3; 
Awards/contracts to worldwide or regional organizations: 
USAID: 7; 
Awards to Cuba Specific NGO's: 
USAID: 5; 
Total awards/contracts from USAID and State: 15.  

Fiscal year: 2001; 
Awards to universities: 
USAID: 3; 
Awards/contracts to worldwide or regional organizations: 
USAID: 8; 
Awards to Cuba Specific NGO's: 
USAID: 5; 
Total awards/contracts from USAID and State: 16.  

Fiscal year: 2002; 
Awards to universities: 
USAID: 3; 
Awards/contracts to worldwide or regional organizations: 
USAID: 5; 
Awards to Cuba Specific NGO's: 
USAID: 6; 
Total awards/contracts from USAID and State: 14.  

Fiscal year: 2003; 
Awards to universities: 
USAID: 4; 
Awards/contracts to worldwide or regional organizations: 
USAID: 7; 
Awards to Cuba Specific NGO's: 
USAID: 8; 
Total awards/contracts from USAID and State: 19.  

Fiscal year: 2004; 
Awards to universities: 
USAID: 4; 
Awards/contracts to worldwide or regional organizations: 
USAID: 5; 
Awards to Cuba Specific NGO's: 
USAID: 6; 
Total awards/contracts from USAID and State: 15.  

Fiscal year: 2005; 
Awards to universities: 
USAID: 4; 
Awards/contracts to worldwide or regional organizations: 
USAID: 6
State: 3; 
Awards to Cuba Specific NGO's: 
USAID: 8; 
Total awards/contracts from USAID and State: 21.  

Fiscal year: 2006; 
Awards to universities: 
USAID: 5; 
Awards/contracts to worldwide or regional organizations: 
USAID: 3
State: 3; 
Awards to Cuba Specific NGO's: 
USAID: 6; 
Total awards/contracts from USAID and State: 17.  

Fiscal year: 2007; 
Awards to universities: 
USAID: 5; 
Awards/contracts to worldwide or regional organizations: 
USAID: 3
State: 8; 
Awards to Cuba Specific NGO's: 
USAID: 5
State: 1; 
Total awards/contracts from USAID and State: 22.  

Fiscal year: 2008; 
Awards to universities: 
USAID: 4; 
Awards/contracts to worldwide or regional organizations: 
USAID: 8
State: 11; 
Awards to Cuba Specific NGO's: 
USAID: 4
State: 5; 
Total awards/contracts from USAID and State: 32.  

Fiscal year: 2009; 
Awards to universities: 
USAID: 5        
State: 1; 
Awards/contracts to worldwide or regional organizations: 
USAID: 11
State: 17; 
Awards to Cuba Specific NGO's: 
USAID: 5
State: 6; 
Total awards/contracts from USAID and State: 45.  

Fiscal year: 2010; 
Awards to universities: 
USAID: 5        
State: 1; 
Awards/contracts to worldwide or regional organizations: 
USAID: 10
State: 13; 
Awards to Cuba Specific NGO's: 
USAID: 3
State: 2; 
Total awards/contracts from USAID and State: 34.  

Fiscal year: 2011; 
Awards to universities: 
USAID: 2        
State: 2; 
Awards/contracts to worldwide or regional organizations: 
USAID: 7
State: 11; 
Awards to Cuba Specific NGO's: 
USAID: 2
State: 5; 
Total awards/contracts from USAID and State: 29.  

Fiscal year: 2012; 
Awards to universities: 
USAID: 1        
State: 2
Awards/contracts to worldwide or regional organizations: 
USAID: 7
State: 11; 
Awards to Cuba Specific NGO's: 
USAID: 3
State: 4; 
Total awards/contracts from USAID and State: 28.  

Source: GAO analysis of USAID and State data.  

[End of figure] 

Most Partners Use Subpartners to Help Implement Program Activities:  

Many partners, and worldwide or regional organizations in particular, 
use subpartners to help carry out their Cuba democracy assistance 
work. We reviewed 29 recent awards and contracts to determine the 
extent to which partners use subpartners to implement program 
activities.[Footnote 21] We found that partners used subpartners under 
21 of the 29 awards and contracts, obligating about 40 percent of the 
funding under these awards and contracts to subpartners. On average, 
partners that used subpartners under an award or contract had 12 
subpartners. 

However, the numbers of subpartners under each of the 21 awards 
varied:  

* Four awards had one subpartner. 

* Seven awards had between two and nine subpartners. 

* Ten awards and contracts had more than 10 and up to 38 subpartners. 

The purposes of subawards and subcontracts also varied greatly. Many 
subawards and subcontracts were for discrete activities, such as to 
conduct workshops. Other subawards and subcontracts covered an array 
of tasks, such as content development and instruction for a distance 
learning course or development, training, and support for civil 
society networks. Accordingly, subpartners included different types of 
non-profit and for-profit organizations as well as individuals who 
worked as consultants that provided the skills necessary to implement 
the varying activities. 

Furthermore, the amount of funding that went to subpartners ranged 
from less than $5,000 to several hundred thousand dollars. For six of 
the 21 awards and contracts with subpartners, the majority of program 
funding was obligated to subpartners. In such cases, subpartners 
generally performed all or most of the programmatic functions under 
the overall award or contract, while the partners' main functions were 
to provide strategic direction of the overall award or contract and to 
perform management functions such as reporting to the agency and 
overseeing their subpartners. 

Worldwide or regional organizations were more likely to use 
subpartners than were the other categories of organizations. In total, 
93 percent of the subawards and subcontracts were awarded by worldwide 
or regional organizations. Also, on average, worldwide or regional 
organizations had 12 subpartners for each of their awards or 
contracts, while Cuba-specific NGOs had three and universities had 
five. Correspondingly, five of the six partners that obligated the 
majority of their funding to subpartners were worldwide or regional 
organizations. 

Agencies Exercise Discretion under Authorizing Legislation in Funding 
Cuba Program Activities:  

USAID and State legal officials view the Cuba program's authorizing 
legislation as providing the purposes for which foreign assistance 
funds may be used and allowing discretion to determine which program 
activities will be funded. The officials stated that they view the 
types of activities listed in section 109(a) of the Helms-Burton Act 
as illustrating, not limiting, the types of program assistance that 
the agencies can provide. Specific authority for Cuba democracy 
assistance activities was provided in section 1705 of the Cuban 
Democracy Act of 1992 and in section 109(a) of the Helms-Burton Act in 
1996.[Footnote 22] Section 1705 authorizes the donation of food for 
NGOs and individuals in Cuba; exports of medicines and medical 
supplies, instruments, and equipment; and assistance to appropriate 
NGOs to support efforts by individuals and organizations to promote 
nonviolent democratic change in Cuba. Section 109(a) authorizes 
assistance and other support that may be provided, such as published 
informational matter for independent democratic groups, humanitarian 
assistance for victims of political repression and their families, and 
support for democratic and human rights groups. 

USAID and State legal officials said that the agencies ensure that 
program activities directly relate to democracy promotion as broadly 
illustrated in related program legislation. For example, the officials 
noted that the types of activities that fit within the scope of 
"democracy promotion," as that term has been broadly defined in 
various foreign assistance appropriations,[Footnote 23] would be the 
types of activities eligible for funding under section 109(a) of the 
Helms-Burton Act. They added that, while the agencies have not 
compiled a list of activities that will be approved or not approved 
for funding under the Cuba program, proposed or approved activities 
are set forth in agency congressional notifications and listed in 
individual requests for proposals or applications and in award 
agreements and contracts. In addition, they said that organizations 
are expected to work with agency program officers to determine what 
activities are permitted or appropriate, and whether Department of 
Treasury and Commerce authorizations, as required, already exist for 
delivery of various types of assistance or whether the organization 
must instead apply for a license.[Footnote 24] Furthermore, they noted 
that program partners and subpartners, including subpartners based in 
other countries, are expected to spend U.S. government funds 
consistent with U.S. laws and that requirements in primary award 
agreements and contracts generally flow down to any subpartners. 

USAID Has Improved Its Monitoring of Partners; State's Monitoring Does 
Not Ensure Program Funds Are Used as Intended:  

Since 2008, USAID has worked to improve performance and financial 
monitoring of its Cuba program partners.[Footnote 25] However, we 
found gaps in State's financial monitoring efforts. For performance 
monitoring, we found some deficiencies in the performance planning and 
reporting conducted by USAID's and State's partners in our 
nongeneralizable sample, but both agencies are taking steps to improve 
their performance monitoring. For financial monitoring, USAID has 
hired an external auditor to perform financial internal controls 
reviews of its partners, and has used a risk-based approach 
considering criteria such as award value and prior issues identified 
to determine the coverage and frequency of the 30 reviews the auditor 
has conducted. These reviews have identified financial management, 
procurement, and internal controls weaknesses that USAID has taken 
steps to address. While State conducted no financial internal controls 
reviews for at least two-thirds of its partners between fiscal year 
2010 and 2012, State recently hired an external auditor to perform 
such reviews starting in fiscal year 2013 and has taken steps to 
implement a risk-based approach to prioritize the scheduling of its 
reviews. Specifically, State plans to complete reviews for three-
quarters of State/DRL's partners and none of State/WHA's partners. In 
addition, in accordance with federal regulations, the agencies approve 
partner requests to award funding to specific subpartners. In June 
2011, USAID provided specific written guidance to its partners on what 
USAID requires for approval of subpartners. State has provided limited 
written guidance on approval to some partners, which does not clearly 
inform partners of the specific types of information State requires 
for approval. As a result, State was not provided with the detailed 
information that officials told us would have been required for State 
to have approved 91 subawards and subcontracts that were obligated 
under eight of its recent awards. 

USAID and State Are Taking Steps to Improve Their Performance 
Monitoring to Address Weaknesses in Some Partners' Performance 
Planning and Reporting:  

USAID Continues to Take Steps to Improve Performance Monitoring; 
USAID's Partners' Had Some Weaknesses in Performance Planning:  

USAID has taken steps to improve its ability to monitor its Cuba 
program partners' performance, by working with them to improve their 
performance planning and reporting.[Footnote 26] USAID has numerous 
requirements for partners' performance planning and reporting, the key 
elements of which are summarized below. 

* Performance Planning: USAID directs its Cuba program partners to 
establish monitoring and evaluation (M/E) plans that include certain 
specific characteristics.[Footnote 27] USAID works with partners to 
include more detailed information on indicators in their M/E plans. 
USAID/LAC also required its one contractor to perform data quality 
assessments on its performance data. 

* Performance Reporting: USAID requires awardees to submit progress 
reports on a quarterly basis and requires contractors to submit 
monthly and annual progress reports, among others.[Footnote 28] USAID 
uses information in these performance reports to track the progress of 
individual awards and contracts and to track the progress of the 
overall Cuba program. According to USAID officials, USAID first 
reviews the reporting to compare it against targets set in partners' 
M/E plans. In addition, USAID analyzes and aggregates the information 
reported by partners to track performance for USAID's Cuba program and 
to report to State's Office of U.S. Foreign Assistance Resources on 
government-wide performance. 

We reviewed the M/E plans and progress reports for the five USAID 
awards or contracts in our nongeneralizable sample, which began in 
fiscal year 2008 or 2009 (see table 3).[Footnote 29] We found some 
weaknesses in the partners' M/E plans but found detailed reporting 
against indicators in the progress reports we reviewed. For example, 
our analysis indicates that all M/E plans we reviewed included clearly 
defined indicators for program activities. 

However, not all partners specified targets and data collection 
methods for each indicator in their M/E plans. Establishing targets 
for indicators during the planning stage is important because targets 
form the standard against which actual results will be compared and 
assessed. Specifying data collection methods for each indicator 
enables the agency to determine whether it will be realistic for the 
partner to measure performance for that indicator in a timely manner. 
One partner included no information on data collection methods in 
their M/E plan, while another partner only included general 
information on their planned data collection methods, such as by 
stating that the data would be collected by subpartners. 

Based on review of the partners' progress reports, we found that all 
partners in our sample reported to USAID on progress through 
quantitative updates against each indicator, allowing USAID to gauge 
the specific progress made during each reporting period.[Footnote 30] 
One partner also reported progress for each individual subpartner, 
including by reporting the number of each subpartner's beneficiaries 
disaggregated by target group. Partners' progress reports also 
provided narrative information describing program activities, 
challenges encountered, and planned activities for the next reporting 
period. 

Table 3: Characteristics of Partners' Performance Planning and 
Reporting for Selected USAID Awards and Contracts:  

Partner: Partner #1; 
Awarding agency and bureau/office: USAID/OTI; 
Performance Planning: M/E plans: 
Indicators clearly defined: Yes; 
Target set for each indicator: No; 
Data collection methods identified for each indicator: Partially; 
Performance reporting: progress reports: 
Updates on progress clearly reported for each indicator: Yes. 

Partner: Partner #2; 
Awarding agency and bureau/office: USAID/LAC; 
Performance Planning: M/E plans: 
Indicators clearly defined: Yes; 
Target set for each indicator: Partially; 
Data collection methods identified for each indicator: Yes; 
Performance reporting: progress reports: 
Updates on progress clearly reported for each indicator: Yes. 

Partner: Partner #3; 
Awarding agency and bureau/office: USAID/LAC; 
Performance Planning: M/E plans: 
Indicators clearly defined: Yes; 
Target set for each indicator: No; 
Data collection methods identified for each indicator: No; 
Performance reporting: progress reports: 
Updates on progress clearly reported for each indicator: Yes. 

Partner: Partner #4; 
Awarding agency and bureau/office: USAID/LAC; 
Performance Planning: M/E plans: 
Indicators clearly defined: Yes; 
Target set for each indicator: Yes; 
Data collection methods identified for each indicator: Yes; 
Performance reporting: progress reports: 
Updates on progress clearly reported for each indicator: Yes. 

Partner: Partner #5; 
Awarding agency and bureau/office: USAID/LAC; 
Performance Planning: M/E plans: 
Indicators clearly defined: Yes; 
Target set for each indicator: Yes; 
Data collection methods identified for each indicator: Yes; 
Performance reporting: progress reports: 
Updates on progress clearly reported for each indicator: Yes. 

Source: GAO analysis of USAID and partner records. 

Note: Each row in the table represents a separate award or contract. 
M/E plans for our sample partners were created in fiscal year 2008 or 
2009 when their awards and contracts began. The progress reports we 
reviewed were from fiscal year 2011, except for Partner #2 progress 
reports from fiscal year 2009.  

[End of table]  

Although we found some gaps in these partners' performance planning, 
USAID/LAC has been working to improve the quality of performance 
information that it receives from its partners,[Footnote 31] with a 
particular emphasis since 2010 on improving their M/E plans. To 
improve M/E plans and partners' reporting based on those plans, in 
2010, according to USAID, USAID/LAC conducted in-depth assessments of 
each of its partners' M/E plans to determine whether they included 
indicator tracking tables, definitions of indicators, data collection 
responsibilities, data quality limitations, and other key information. 
Also, in September 2010, USAID/LAC hired an M/E contractor to work 
with each of its partners to further improve and standardize their 
performance management systems. The M/E contractor has worked with 
partners to identify and track the most appropriate indicators, 
including any applicable standardized indicators that USAID/LAC can 
aggregate across the partners to determine its own overall progress. 
In 2011, this M/E contractor also provided training to each partner 
and helped them to improve their M/E plans, for example by specifying 
quarterly targets and data collection plans for each indicator. 
According to M/E contractor representatives, partners' performance 
planning has improved, although additional improvement is needed in 
the quality of some partners' data. In fiscal year 2013, the M/E 
contractor plans to perform data quality audits of the partners. 
[Footnote 32] 

State Is Taking Steps to Improve Performance Monitoring to Address Its 
Partners' Weaknesses in Performance Planning and Reporting:  

State has also made some recent improvements to performance monitoring 
of its Cuba program, in the areas of both performance planning and 
reporting. State's requirements for performance planning and reporting 
include:  

* Performance Planning: State/DRL and State/WHA have provided 
different requirements for prospective partners regarding elements of 
M/E plans. 

- State/DRL. In 2010, State/DRL increased the level of requirements 
for prospective partners' M/E plans through the request for proposal 
(RFP) it issued that year.[Footnote 33] Previously, State/DRL required 
that prospective partners submit an M/E plan but did not specify 
characteristics that the M/E plan should include. The RFP issued in 
2010 specified that M/E plans should include a baseline and target for 
each indicator and data collection methods and sources, among other 
characteristics. In addition, the RFP referenced M/E guidance 
available on State/DRL's website that included more details on how to 
develop an effective M/E plan. 

- State/WHA. For the State/WHA award in our sample, the RFP issued in 
fiscal year 2010 required the prospective partner to submit an M/E 
plan outlining performance indicators, sources and means for 
verification, risks and assumptions for goals and objectives, and 
expected results and activities. For WHA's most recent RFPs issued in 
fiscal year 2012, State/WHA also included additional guidance for 
prospective partners' M/E plans, for example, including by defining 
indicators and providing a sample M/E plan. In addition, State/WHA 
further clarified that all indicators in M/E plans must include 
measurable, numerical targets. 

* Performance Reporting: Both State bureaus require their partners to 
submit quarterly progress reports.[Footnote 34] According to State/DRL 
and State/WHA officials, they review partners' quarterly reports 
against the partners' planned performance to confirm that the awards 
are making progress toward established targets and that activities 
align with the award's objectives.[Footnote 35] State officials then 
analyze the quarterly progress reports to aggregate progress for each 
of its bureaus with USAID's progress to be able to report government-
wide performance for the Cuba democracy program to State's Office of 
U.S. Foreign Assistance Resources. 

State's partners that we reviewed ranged in the amount and kind of 
detail they included in their M/E plans as well as in their progress 
reports. For the State awards in our sample, we found that State/WHA's 
partner had the most clearly defined M/E plan (see table 4). This 
partner's M/E plan included specific and clearly defined indicators, 
targets against which the partner could measure its performance, and 
clear plans for data collection. For the four State/DRL awards, the 
partners included indicators in their M/E plans but did not define 
them.[Footnote 36] 

We also found that one partner with three State/DRL awards did not set 
clear targets for a number of its indicators. In addition, two 
partners identified some data collection methods in their M/E plans, 
but did not clearly identify which methods would be used to collect 
data for each individual indicator. 

We also found that, for State/WHA's award, progress reports included 
detailed reporting against each indicator, as well as additional 
qualitative and quantitative information on overall progress including 
survey results and statistics. On the other hand, reporting for the 
State/DRL awards lacked such detail. For example, for one State/DRL 
award, the partner tracked its performance in quarterly reports for 
only 3 of the more than 10 indicators in its M/E plan. For three other 
awards, the partner did not aggregate or track performance against any 
specific indicators in their progress reports. While not reporting on 
progress against specific indicators, these partners generally 
reported anecdotally on the topics covered in the indicators or 
scattered some performance data throughout their reports. 

Table 4: Characteristics of Partners' Performance Planning and 
Reporting for Selected State Awards:  

Partner: Partner #3[A]; 
Awarding agency and bureau/office: State/DRL; 
Performance Planning: M/E plans: 
Indicators clearly defined: Partially; 
Target set for each indicator: No; 
Data collection methods identified for each indicator: Yes; 
Performance reporting: progress reports: Updates on progress clearly 
reported for each indicator: No. 

Partner: Partner #3; 
Awarding agency and bureau/office: State/DRL; 
Performance Planning: M/E plans: 
Indicators clearly defined: Partially; 
Target set for each indicator: Partially; 
Data collection methods identified for each indicator: Yes; 
Performance reporting: progress reports: Updates on progress clearly 
reported for each indicator: No. 

Partner: Partner #3; 
Awarding agency and bureau/office: State/DRL; 
Performance Planning: M/E plans: 
Indicators clearly defined: Partially; 
Target set for each indicator: Partially; 
Data collection methods identified for each indicator: Partially; 
Performance reporting: progress reports: 
Updates on progress clearly reported for each indicator: Partially. 

Partner: Partner #5; 
Awarding agency and bureau/office: State/DRL; 
Performance Planning: M/E plans: 
Indicators clearly defined: Partially; 
Target set for each indicator: Yes; 
Data collection methods identified for each indicator: Partially; 
Performance reporting: progress reports: 
Updates on progress clearly reported for each indicator: Partially. 

Partner: Partner #6; 
Awarding agency and bureau/office: State/WHA; 
Performance Planning: M/E plans: 
Indicators clearly defined: Yes; 
Target set for each indicator: Yes; 
Data collection methods identified for each indicator: Yes; 
Performance reporting: progress reports: 
Updates on progress clearly reported for each indicator: Yes. 

Source: GAO analysis of State and partner records. 

Notes: Each row in the table represents a separate award. M/E plans 
for our sample partners were created in fiscal year 2009 or 2010 when 
their awards and contracts began. The progress reports we reviewed 
were from fiscal year 2011, except for the reports for Partner #3's 
third award, which were from fiscal year 2012. 

[A] One State/DRL partner (Partner #3) received three awards during 
the period of our sample, and we reviewed that partner's planning and 
reporting for all three awards.  

[End of table]  

In September 2012, State/DRL awarded a contract to a firm specializing 
in M/E, which could address such gaps in its partners' performance 
planning and reporting.[Footnote 37] In the area of performance 
planning, State/DRL has directed the M/E contractor to provide 
training and technical assistance to its partners to improve their M/E 
plans, such as to ensure they include information on data collection 
methods. In addition, State/DRL directed the M/E contractor to develop 
indicators for all State/DRL partners to report on that meet or 
surpass data quality standards. This should allow State/DRL to more 
easily aggregate information on the overall performance of its Cuba 
program partners. 

Partners Generally Monitored Subpartner Performance and Used Various 
Methods to Monitor Beneficiaries:  

The partners in our sample had various policies, procedures, and 
mechanisms in place for monitoring subpartner performance, which they 
compiled information on to report to the agencies.[Footnote 38] We 
found that partners generally required subpartners to report on their 
activities quarterly or monthly, and at the end of a subaward or 
subcontract. Some partners also required subpartners to submit trip 
reports after any travel to Cuba.[Footnote 39] Other monitoring 
practices cited by partners included site visits to subpartners and 
frequent communication via phone, email, or in-person. 

Because of security concerns and limited on-site monitoring in Cuba, 
partners and subpartners use a variety of methods to verify the 
delivery of assistance to Cuban beneficiaries. Representatives from 
USAID's M/E contractor indicated that partners have had difficulty 
collecting and reporting data because of Cuban beneficiaries' 
reluctance to maintain and provide specific information in writing 
(e.g., timesheets, attendance sheets, or other documents naming 
beneficiaries). However, the M/E contractor has found that partners 
and subpartners often communicate with beneficiaries though various 
means. Similarly, according to representatives of partners and 
subpartners we interviewed,[Footnote 40] some delivery verification 
methods they used included the following:  

* having future travelers ask beneficiaries how they used assistance 
provided previously; and:  

* observing beneficiaries' use of assistance through remote or 
indirect means--for example, through articles published online that 
demonstrate that beneficiaries received training. 

Partners generally aggregate information obtained from such methods in 
their progress reports to the agencies. However, in certain instances, 
the monitoring methods selected have limited subpartners' ability to 
track and report detailed information. For example, one subpartner 
reported on an indicator, the number of signatures on petitions, by 
providing data that it obtained over the phone (instead of through 
document reviews that would prevent double counting of signatures and 
allow for other data quality checks). In addition, USAID's M/E 
contractor has found cases in which data could not be transmitted in a 
timely manner, preventing reporting on activities in the quarter when 
they were implemented. As a result, both the partners and the agencies 
can have difficulty knowing the exact numbers and identities of 
beneficiaries in Cuba. 

USAID Has Improved Financial Monitoring of Partners; State Has Not 
Consistently Conducted Financial Internal Controls Reviews:  

USAID Has Bolstered Financial Monitoring of Its Partners:  

Since 2008, USAID has made improvements to financial monitoring of its 
Cuba program partners.[Footnote 41] In April 2008, USAID/LAC hired an 
external auditor to perform financial internal controls reviews of its 
partners to ensure that they have appropriate internal controls and to 
review selected transactions under the program to ensure that they are 
allowable, allocable, and reasonable.[Footnote 42] Since 2008, this 
auditor has conducted 30 audits across 13 of the 16 partners USAID 
funded during fiscal years 2007 through 2010. These audits are in 
addition to audits performed by USAID's Management Bureau and its 
Inspector General.[Footnote 43] Across its different auditing 
entities, USAID has a goal of reviewing each partner approximately 
once every 6 months. Other risk-based factors are considered in the 
scheduling and sequencing of reviews, such as preaward reviews, prior 
audit findings, and period of performance. 

Through December 2011, the external auditor had found 50 instances of 
unsupported costs, such as insufficient documentation and lack of 
authorization, and 15 instances of excessive costs charged to an award 
or contract, such as charging incorrect rates or expenses not 
allocable to the award or contract. In sum, the external auditor 
questioned 11 percent of the charges made to USAID/LAC during the 
external auditor's periods of review.[Footnote 44] In addition, the 
external auditor found inadequacies in the following three main areas:  

* the financial management systems at 11 partners, 

* procurement standards at 8 partners, and:  

* internal controls at 8 partners. 

Two of the external auditor's most common specific findings were that 
(1) partners did not properly complete their quarterly financial 
reports, and (2) partners did not perform a cost-price analysis before 
procuring a subpartner or equipment to ensure that it was procured at 
a fair price.[Footnote 45] Specifically, the external auditor found 
that four partners did not provide any documentation of a cost-price 
analysis. In addition, the auditor found that another four partners 
had insufficiently completed or documented cost-price analyses, either 
by performing them verbally but not documenting them or by having 
unorganized or unexplained documentation of the cost-price analysis, 
limiting the external auditor's ability to confirm the reasonableness 
of the costs in question. 

As a result of the external auditor's findings, USAID/LAC has provided 
training to partners and, according to USAID/LAC's external auditor, 
partners have made improvements. First, USAID/LAC asked the external 
auditor to provide briefings to the Cuba program partners at their 
December 2008 and March 2011 quarterly meetings on topics such as 
unallowable expenses, internal control standards, and procurement 
regulations. In addition, our review of audit reports issued from 2008 
through 2011 showed that the external auditor found fewer inadequacies 
at some partners that had previously been audited. An official with 
USAID's external auditor who is responsible for these audits noted 
that recent reviews have found that the partners have improved their 
financial management capacity. 

USAID/OTI used other processes to regularly monitor the financial 
performance of its partner under the Cuba democracy program. According 
to USAID/OTI, USAID/OTI staff worked closely with their Cuba program 
partner to plan future expenditures and reviewed documentation related 
to individual subpartners to determine each subpartner's real costs. 
In addition, USAID/OTI officials maintained a database that the 
partner updated on a weekly basis, allowing USAID/OTI to monitor all 
expenditures weekly. 

Based on our financial internal controls reviews of the five USAID 
awards and contracts in our nongeneralizable sample (see table 5 in 
appendix I),[Footnote 46] we found that partners' internal controls 
included (1) policies to prevent the commingling of U.S. government 
funds, such as unique accounting codes to identify awards and separate 
bank accounts for U.S. government funds; (2) policy manuals to 
instruct employees on the proper use of U.S. government funds received 
through grants and contracts; and (3) procedures to segregate 
incompatible financial duties. We found that USAID/LAC was overcharged 
for some overhead and labor expenses by one of USAID/LAC's partners in 
our sample.[Footnote 47] 

State Has Not Consistently Performed Financial Internal Controls 
Reviews of Its Partners but Plans to Bolster Its Monitoring of Some 
Awards:  

State has not consistently conducted ongoing, in-depth financial 
monitoring of its Cuba program partners. State's Bureau of 
Administration is responsible for conducting financial internal 
controls reviews of State/DRL's and State/WHA's partners.[Footnote 48] 
However, the Bureau of Administration has conducted financial internal 
controls reviews of less than one-third of partners active since 
fiscal year 2010. For State/DRL awards, the Bureau of Administration 
conducted one review in each fiscal year for 2010 and 2011 and four in 
July 2012. It conducted no reviews of State/WHA partners.[Footnote 49] 
According to State officials, the Bureau of Administration attempts to 
conduct financial internal controls reviews at least once during the 
course of each DRL and WHA award but has not done so for many of its 
awards because of staffing turnover and constraints in the Bureau of 
Administration. 

In September 2012, State/DRL awarded funding to an external auditor to 
perform financial internal controls reviews in fiscal year 2013. 
During this fiscal year, State intends for the auditor to perform one 
review of three-quarters of State/DRL's partners and no reviews of 
State/WHA's partners.[Footnote 50] State provided documentation to us 
showing that, in October 2012, State/DRL worked with the external 
auditor to develop a preliminary plan to select the ordering of its 
partners to be reviewed using a risk-based approach that considered 
criteria such as the value of awards, any prior financial compliance 
issues identified, and the partners' internal administrative capacity. 

We conducted financial internal controls reviews on three partners 
with five State awards in our nongeneralizable sample (see table 5 in 
appendix I).[Footnote 51] These three partners had been recently 
reviewed by USAID/LAC's external auditor, because they have also been 
USAID/LAC awardees, and had made internal control improvements in 
response to the auditor's findings.[Footnote 52] Similar to our review 
of USAID's partners, we found that partners had internal control 
mechanisms in place, including (1) policies to prevent the commingling 
of U.S. government funds, (2) policy manuals to instruct employees on 
the proper use of U.S. government funds, and (3) procedures to 
segregate incompatible financial duties. However, State has had eight 
partners with nine State/DRL and State/WHA awards active in fiscal 
years 2011 or 2012 that have received no financial internal controls 
reviews during the course of their awards, through either State's 
Bureau of Administration or USAID's external auditor. 

USAID and State Partners Used a Range of Mechanisms for Financial 
Monitoring of Subpartners:  

Our review of the six partners in our nongeneralizable sample found 
that partners had written policies and procedures for financial 
monitoring of their subpartners' use of program funding.[Footnote 53] 
For example, partners had risk assessment processes to determine the 
level of monitoring required for a certain subpartner, depending on 
that subpartner's capacity and the type of subaward or subcontract. In 
addition, some of the partners required certain types of subpartners 
to provide receipts to document 100 percent of expenses.[Footnote 54] 

To test the partners' application of their financial monitoring 
policies and procedures, we conducted reviews of 11 subpartners under 
the six partners in our sample.[Footnote 55] Generally, all partners 
maintained the necessary documentation (i.e., receipts, timesheets, 
authorizations) to support expenses incurred at the subpartner level. 
We found that partners maintained varying levels of documentation on 
cost-price analyses performed and that one partner had incomplete 
documentation for one of its subpartner's expenditures. 

* For three of the five subpartners with fixed-price subcontracts in 
our sample,[Footnote 56] documentation supporting the partners' cost-
price analyses included (1) the actual amounts paid for similar 
services to subpartners on previous awards, (2) price quotes to 
procure supplies and equipment from various vendors, or (3) surveys 
demonstrating the market value of labor paid for different labor 
categories to substantiate that the amounts were within industry 
standards. For two of the five subpartners with fixed-price 
subcontracts within our sample, the partners documented that they 
believed the price of the subcontract to be fair based on the 
partner's prior experience.[Footnote 57] 

* One subpartner of a USAID/LAC partner submitted its receipts in a 
foreign language that staff at the partner could not read and provided 
little explanation of the receipts. 

Agencies Have No Direct Relationships with Subpartners except to 
Approve Their Funding, and State Does Not Provide Clear Guidance on 
Subpartner Approval Requirements:  

Agencies Have No Direct Relationships with Subpartners Other Than 
Approving Partner Requests for Their Funding:  

USAID and State have no direct relationships with their partners' 
subpartners. Partners are responsible for all oversight of their 
subpartners and for reporting to the agencies any updates and problems 
related to the subpartners' work, such as through any quarterly 
reports and site visits. However, the agencies are generally required 
to approve any partner requests to award funding to subpartners. 
[Footnote 58] 

USAID Provides Specific Guidance to Its Partners on Requirements for 
Subpartner Approval:  

USAID has provided guidance to its Cuba program partners on what is 
required for approval of subpartners, both during the preaward phase 
and during the course of the award. 

* Preaward phase. According to USAID officials, subpartners can be 
considered pre-approved during the preaward phase if they are 
described in award proposals, in accordance with the standard 
provisions that are referenced in partners' awards. USAID officials 
indicated that some of USAID's partners in the past had interpreted 
the term "described" to include any reference in a proposal to a 
subpartner's activities, even if the proposal did not specify that the 
work would be completed by a subpartner or provide specific 
information about the subpartner. As a result, USAID learned--through 
reviews conducted since May 2009 by its external auditor and its own 
subsequent reviews--that some partners had subcontracts and subawards 
USAID had not approved. In response, in June 2011, USAID added 
guidance to its requests for applications (RFA) on the type of 
information that partners must submit in order to receive prior 
approval for all types of subpartners.[Footnote 59] This information 
includes, for example, 

* the name of the proposed subpartner, 

* a description of the work to be performed by the subpartner under 
the award, 

* the total estimated cost to be paid to the subpartner, and:  

* a detailed, line-item budget. 

In some cases, USAID accepts this information orally if the partner is 
concerned that the leaking of this information could compromise the 
security of individual consultants who travel to Cuba. To provide 
further clarity to partners on whether or not USAID considers 
subpartners as approved during the preaward phase, USAID stated in its 
RFAs issued in fiscal year 2011 that a subaward or subcontract is not 
considered approved until the USAID Agreement Officer in the 
Management Bureau signs a letter approving it. 

* Award phase. For USAID approval during the award phase, the partner 
must submit all of the same information as required during the 
preaward phase, as well as a copy of the proposed agreement with the 
subpartner and documentation of the process through which the subaward 
or subcontract was procured. [Footnote 60] In May 2011, to further its 
understanding of the work to be performed by its subpartners, 
USAID/LAC set up a technical evaluation committee. For ongoing awards, 
partners submit proposed subpartners for approval to the committee. 
The committee may ask for information on proposed subpartner 
activities, among other things, to ensure that the programmatic 
content of the work to be performed by subpartners fits in the scope 
of the overall award. 

State Does Not Provide Clear Guidance to Its Partners on Subpartner 
Approval Requirements:  

State's Bureau of Administration is responsible for approving 
subawards and subcontracts under State/DRL and State/WHA awards, and 
has requirements similar to USAID's. However, State does not clearly 
inform its Cuba program partners of these requirements in written 
guidance and, as a result, some partners have not provided the 
required information. 

According to language in State's Standard Terms and Conditions, 
[Footnote 61] prior written approval is required for any subawards or 
subcontracts unless they are described in the application and funded 
in the approved award.[Footnote 62] Specifically, State officials told 
us that the Bureau of Administration requires certain information and 
documentation to approve subpartners, including:  

* the name of the subpartner organization, 

* a copy of the draft agreement with the subpartner, 

* the amount of and budget for the agreement, 

* the period of performance, and:  

* a description of the subpartner's role. 

According to State officials, State's requirements are currently the 
same whether a partner obtains preapproval during the preaward phase 
or during the course of the award. They added that, for consultants 
under State/DRL awards, the Bureau of Administration does not require 
their names because of security and sensitivity concerns. Instead, 
according to officials, the Bureau of Administration requires 
information on the amount of the consultancy contract, the 
consultant's budget, and a description of the consultant's role and 
qualifications.[Footnote 63] Nevertheless, the detailed information 
that State told us is required to preapprove subawards, subcontracts, 
and consultants is not specified in written guidance to all partners. 
For example, in State's handbook for grant recipients, State informs 
recipients to provide in award proposals details on any subpartners, 
but does not specify the type of information to provide. In addition, 
based on our review of fiscal year 2010 and 2011 award documents, we 
found that in cases when State/DRL is made aware of a prospective 
partner's intention to have a subpartner through review of their 
proposal, State/DRL included a requirement in the partner's award to 
provide a copy of the agreement with that specific subpartner to State 
within 10 days of its execution. However, State/DRL omitted this 
requirement from awards for which it was not clear the partner 
intended to use a subpartner. As a result, we found that many partners 
only received the broad written guidance in State's Standard Terms and 
Conditions and recipient handbook. 

Based on our analysis of the use of subpartners under recent State 
awards,[Footnote 64] we found that State had sufficient information to 
preapprove the subawards and subcontracts under State/WHA's awards. 
However, State did not have the detailed information that, according 
to State officials, would be required to approve 91 subawards and 
subcontracts to which partners obligated funding under 8 State/DRL 
awards. 

According to representatives of one of the State/DRL partners, they 
assumed that State was aware of their subawards and subcontracts and 
considered them preapproved because the partners' proposals had 
referenced the types of work to be performed under the award by the 
subpartners. We found, however, that the partners' proposals only 
provided general information for all proposed subpartners, such as an 
estimated total cost aggregated for all subawards and subcontracts. 
The proposals did not specify information about individual proposed 
subawards or subcontracts, such as proposed periods of performance, a 
description of the work to be performed, or copies of draft subpartner 
agreements. Officials said that State has provided training to grants 
officers over time to ensure greater consistency in the application of 
preapproval requirements. However, we interviewed two partners with 
ongoing State/DRL awards, and both were still unaware of the 
information required for subpartner approval. 

Conclusions:  

USAID has been implementing Cuba democracy assistance efforts since 
1996, and State's role in the program has increased since it began 
providing assistance several years later, in 2004. More than $200 
million has been provided for these efforts over the past 15 years, 
with recent growth in the use of worldwide and regional organizations 
that often use subpartners to help implement program activities. 
Despite ongoing challenges stemming from the difficult operating 
environment in Cuba, since our 2006 and 2008 reports, USAID has taken 
steps to improve its performance and financial monitoring of Cuba 
democracy program awards. While State has also taken initial steps to 
improve performance monitoring of its Cuba program awards, we found 
that State's financial monitoring was lacking in certain areas. 

For performance monitoring of Cuba program partners, both USAID and 
State have required partners to submit program planning and reporting 
documents that the agencies use to monitor their partners' 
implementation of program activities and progress toward program 
goals. Although we found some gaps in these efforts, such as instances 
in which partners did not identify targets in performance plans, 
lacked clearly defined indicators, or did not report on established 
indicators, both agencies are taking steps to improve performance 
monitoring of their partners. Specifically, since 2010, USAID has used 
an external contractor to enhance its Cuba program monitoring and 
evaluation efforts. In September 2012, State hired an organization for 
a similar purpose, with work on this effort slated to begin in fiscal 
year 2013. 

To enhance financial monitoring, in 2008 USAID hired an external 
auditor to perform financial internal controls reviews of its Cuba 
program partners and used a risk-based approach to determine how often 
each partner should be reviewed to enable more efficient and effective 
reviews, with resources focused on areas of greater risk. Such an 
approach considers key factors such as the value of awards, coverage, 
previously identified deficiencies, award type, and the frequency of 
the reviews that will be needed. USAID's auditor conducted 30 audits 
through fiscal year 2012, which identified questionable charges and 
weaknesses in partners' financial management, procurement standards, 
and internal controls. State did not conduct financial internal 
controls reviews for more than two-thirds of its awards during fiscal 
years 2010 through 2012, although State recently awarded funding to an 
external auditor for this purpose and has taken steps toward 
implementing a risk-based approach for these reviews. However, because 
these actions were taken recently, State's ability to ensure that 
funds are being spent as intended remains unknown until it has 
completed these reviews. Moreover, unlike USAID, State has not 
provided clear guidance to its partners regarding requirements for 
subpartner approval. As a result, State lacks complete and accurate 
information on its partners' use of subpartners to implement program 
efforts. Without adequate information on program subpartners, State 
has limited ability to fully understand and assess its partners' use 
of program funds. 

Recommendations for Executive Action:  

To strengthen State's ability to monitor the use of Cuba democracy 
program funds, we recommend that the Secretary of State take the 
following two actions:  

* To enhance financial oversight, use a risk-based approach for 
program audits, including those conducted by an external auditor, that 
considers, among other factors, specific indicators--such as value of 
awards, prior deficiencies, oversight coverage, and frequency--for 
each of State's Cuba program partners. 

* To obtain sufficient information to approve implementing partners' 
use of subpartners, provide clear guidance to implementing partners 
regarding requirements for approval of the use of subpartners, and 
monitor implementing partners to ensure that they adhere to these 
requirements. 

Agency Comments and Our Evaluation:  

We provided a draft of this report to USAID and State for review and 
comment. Their written comments are reproduced in appendixes II and 
III, respectively. USAID noted that it is a challenge to implement 
assistance programs in countries where USAID does not have dedicated 
staff in-country, and cited their ongoing commitment to ensuring that 
Cuba democracy assistance programs managed by USAID receive 
appropriate management and oversight to minimize waste and 
mismanagement and maximize impact on the ground in Cuba. USAID 
highlighted steps that the agency has taken to improve program 
management, such as dedicating additional resources to conduct 
financial audits and monitoring of awardees, and conducting pre-award 
audits on organizations with limited or no experience managing USAID-
funded projects. USAID expressed appreciation for our recognition of 
the agency's program improvements. 

State concurred with both of our recommendations and noted relevant 
actions it has taken or plans to take. Regarding our recommendation to 
enhance financial oversight through using a risk-based approach for 
Cuba program audits, State noted that the external auditor that State/ 
DRL recently procured to audit some of its partners has taken steps to 
implement a risk-based approach. State further noted that the 
department is evaluating staffing in its Bureau of Administration and 
audit requirements to be able to address program oversight needs not 
covered by this external auditor. State also concurred with our 
recommendation to obtain sufficient information to approve 
implementing partners' use of subpartners. State said that it plans to 
hold meetings with awardees to discuss award requirements and provide 
an orientation on resources and technical support available to Cuba 
program awardees. 

USAID and State also provided technical comments that we have 
incorporated, as appropriate. 

As agreed with your office, unless you publicly announce the contents 
of the report earlier, we plan no further distribution until 30 days 
after the report date. At that time, we will send copies of the report 
to interested congressional committees, the Administrator of USAID, the 
Secretary of State, and other interested parties. In addition, the 
report will be available at no charge on GAO’s website at [hyperlink, 
http://www.gao.gov].

If you or your staff have any questions about this report, please 
contact me at (202)512-3149 or gootnickd@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix IV. 

Sincerely yours,  

Signed by:  

David Gootnick, Director: 
International Affairs and Trade:  

[End of section]  

Appendix I: Objectives, Scope, and Methodology:  

This report (1) identifies the types and amounts of democracy 
assistance that the United States Agency for International Development 
(USAID) and the Department of State (State) have provided to Cuba and 
characteristics of implementing partners, subpartners, and program 
beneficiaries; (2) reviews USAID's and State's efforts to implement 
the program in accordance with U.S. laws and regulations and to 
address program risks; and (3) examines USAID's and State's monitoring 
of the use of program funds. This report is a publicly releasable 
version of a prior GAO report, issued in December 2012, that USAID and 
State had designated Sensitive But Unclassified. 

To identify types and amounts of democracy assistance, and 
characteristics of implementing partners (partners), subpartners, and 
beneficiaries, we reviewed congressional notifications, agency and 
partner documents and data on program awards and funding, copies of 
award agreements and contracts and any modifications, partner interim 
and final reports, and other key documents and data. We interviewed 
agency officials and partner representatives to corroborate 
information and data obtained. We also discussed Cuba democracy 
assistance with officials at the National Endowment for Democracy. 
[Footnote 65] We reviewed amounts of assistance and characteristics of 
partners that received program funding in fiscal years 1996 through 
2012. To test the reliability of funding data, we compiled lists of 
all funding that went to each partner and sent these lists to USAID 
and State for verification. In addition, we reviewed the use of 
subpartners under all of USAID's and State's 29 awards and contracts 
that were active in fiscal year 2011, which were funded with 
appropriations from fiscal years 2007 through 2009. These awards and 
contracts were awarded to 22 partners. We obtained information and 
data from each of the partners on their use of subpartners under the 
respective awards and contracts. For the purposes of our review, we 
defined subpartners as recipients of subawards, including subgrants, 
grants under contract, subcontracts, or consultants. To test the 
reliability of subpartner data, we compared information obtained from 
partners to agency information, and interviewed agency and partner 
officials regarding any discrepancies. We determined data on program 
funding and on the use of subpartners were sufficiently reliable for 
the purposes of this report. 

To review USAID's and State's efforts to ensure that program 
implementation is consistent with U.S. laws and regulations, and to 
provide guidance to partners and subpartners regarding program risks, 
we reviewed relevant U.S. laws and regulations and agency and 
departmental policies and procedures. We also interviewed USAID and 
State legal and program officials regarding program implementation and 
related risks. For selected partners and subpartners, we reviewed 
award agreements; contracts; and partner guidance, policies, and 
procedures regarding program security risks and travel security and 
safety. We also interviewed representatives of partners and 
subpartners regarding program security risks and traveler safety and 
security measures. 

We analyzed reported activities and assistance delivered, and 
management and internal controls for a nonprobability,[Footnote 66] 
nongeneralizable sample of six USAID and State partners and 11 of 
their subpartners, in order to assess performance and financial 
monitoring and oversight of their awards and contracts. While the 
results of our analysis of these six partners are not generalizable to 
the population, we selected this nonprobability sample to be generally 
reflective of other partners in the population and to cover a large 
proportion of the overall dollar value of aid. We selected at least 
one partner from each of the four USAID and State bureaus and offices 
implementing program assistance--USAID's Bureau of Latin American and 
Caribbean Affairs (LAC); the Office of Transition Initiatives (OTI) 
within USAID's Bureau for Democracy, Conflict, and Humanitarian 
Assistance; State's Bureau of Democracy, Human Rights, and Labor 
(DRL); and State's Bureau of Western Hemisphere Affairs (WHA). While 
there were in total 29 partners from which we selected, the six 
selected partners were among the top 15 recipients of program funding 
awarded in fiscal years 2007 through 2010, and represented about 60 
percent of funding for awards active in fiscal year 2011. Other 
factors that we considered in selecting partners included the timing 
of the awards and contracts--we selected partners with awards or 
contracts active in fiscal year 2011--and other strategic factors, 
such as the type of activity planned under the award or contract and 
whether the partner had ongoing or new program activities planned for 
fiscal year 2012 and beyond. We judgmentally selected two subpartners 
for further review under each of the partners, except for the one 
partner that only used one subpartner. To select subpartners, we 
considered factors such as funding received, whether the subpartner 
had recent activity in fiscal year 2011, the type of activity 
implemented, and other strategic factors. These subpartners are not 
generalizable to the population, but provided additional program 
context and examples for the purposes of our review. Table 5 provides 
additional information on the partners in our sample. 

Table 5: Selected USAID and State Implementing Partners:  

Implementing partner: Partner #1; 
Awarding agency and bureau/office for each award/contract: USAID/OTI; 
Total obligation to award/contract: $11,600,000; 
Number and type of subpartners reviewed per award/contract: Two 
subgrantees. 

Implementing partner: Partner #2; 
Awarding agency and bureau/office for each award/contract: USAID/LAC; 
Total obligation to award/contract: $6,857,817; 
Number and type of subpartners reviewed per award/contract: Two 
subgrantees. 

Implementing partner: Partner #3; 
Awarding agency and bureau/office for each award/contract: USAID/LAC; 
Total obligation to award/contract: $3,300,000; 
Number and type of subpartners reviewed per award/contract: One 
subcontractor and one subgrantee. 

Implementing partner: Partner #3; 
Awarding agency and bureau/office for each award/contract: State/DRL; 
Total obligation to award/contract: $591,000; 
Number and type of subpartners reviewed per award/contract: [Empty]. 

Implementing partner: Partner #3; 
Awarding agency and bureau/office for each award/contract: State/DRL; 
Total obligation to award/contract: $500,000; 
[Empty]; 
Number and type of subpartners reviewed per award/contract: [Empty]. 

Implementing partner: Partner #3; 
Awarding agency and bureau/office for each award/contract: State/DRL; 
Total obligation to award/contract: $837,053; 
[Empty]; 
Number and type of subpartners reviewed per award/contract: [Empty]. 

Implementing partner: Partner #4; 
Awarding agency and bureau/office for each award/contract: USAID/LAC; 
Total obligation to award/contract: $3,700,000; 
Number and type of subpartners reviewed per award/contract: Two 
subcontractors. 

Implementing partner: Partner #5; 
Awarding agency and bureau/office for each award/contract: USAID/LAC; 
Total obligation to award/contract: $3,000,000; 
Number and type of subpartners reviewed per award/contract: One 
subgrantee. 

Implementing partner: Partner #5; 
Awarding agency and bureau/office for each award/contract: State/DRL; 
Total obligation to award/contract: $591,000; 
Number and type of subpartners reviewed per award/contract: One 
subcontractor. 

Implementing partner: Partner #6; 
Awarding agency and bureau/office for each award/contract: State/WHA; 
Total obligation to award/contract: $821,232; 
Number and type of subpartners reviewed per award/contract: One 
subcontractor. 

Source: GAO analysis of USAID, State, and implementing partner 
records.  

[End of table]  

To examine USAID's and State's monitoring of the use of program funds, 
we reviewed and analyzed performance and financial documentation and 
data and conducted interviews with USAID and State officials, as well 
as representatives of partners and subpartners in our sample. In 
addition, we conducted fieldwork in Miami, Florida--where we 
interviewed representatives and reviewed documentation at local 
partners and subpartners--and at the U.S. Interests Section (USINT) in 
Havana, Cuba--where we interviewed U.S. officials and partner 
representatives, and observed WHA-funded democracy assistance 
activities at post. We examined USAID's and State's program 
operational plans and performance progress reports; agency and partner 
policy and procedure manuals and program guidance; agendas and 
information presented at quarterly partner meetings; partner and 
subpartner award agreements and contracts; partner implementation, 
monitoring and evaluation (M/E) plans; partner and subpartner interim 
and final performance and financial reports; and audits of partner 
activities, among other documents and data. 

To review partners' M/E plans, we assessed whether each plan had three 
of the basic elements of M/E plans, as described in USAID and State 
guidance: (1) clearly defined indicators, (2) targets set for each 
indicator, and (3) data collection methods specified for each 
indicator. We selected these criteria since they were common elements 
that M/E plans should have, according to USAID and State guidance. 
Because we focus on assessing the agencies' and partners' abilities to 
monitor, not to evaluate, the Cuba democracy program, we did not 
select criteria for assessing any portions of the M/E plans related to 
evaluation. We analyzed each M/E plan to determine the extent to which 
the plan incorporated each element. For example, we determined that an 
M/E plan partially met the criterion for clearly defined indicators if 
the plan had indicators but did not provide definitions for the 
indicators. For targets, we assessed a partner's M/E plan as having 
partially met the criterion if there were relevant targets specified 
for some but not all indicators. For data collection methods, we 
assessed the partner's M/E plan as having partially met the criterion 
if data collection methods were only described for some indicators or 
if the plan generally described data collection methods, but did 
specify which methods pertained to each indicator. 

To review partners' progress reports, we assessed whether progress was 
clearly reported against each indicator identified in the M/E plans. 
We determined that a partner's progress report met this criterion if 
the report included specific updates on progress for each indicator, 
with any progress for quantitative indicators (e.g., number of 
beneficiaries) reported in numeric form. We assessed a partner's 
progress report as partially having met the criterion if it reported 
progress in this specific way on some but not all indicators. We 
assessed a partner's progress report as not having met the criterion 
if the partner did not clearly report progress on any of its 
indicators. 

Additionally, we interviewed officials from the two organizations 
contracted by USAID/LAC to conduct performance and financial reviews 
of partners. We reviewed partner and subpartner internal controls and 
related residual fiscal accountability risk, and also performed walk-
throughs of their disbursement processes and reviewed invoices and 
other supporting documentation. We primarily focused our review on 
compliance with internal controls standards relating to monitoring of 
program funds and to reviewing certain control activities.[Footnote 
67] We performed selected expenditure testing at each partner and 
subpartner in our sample, when applicable, to identify potential 
internal controls or financial management issues. We also reviewed our 
previous reports and interviewed experts to identify lessons learned 
and to better understand challenges related to providing democracy 
assistance for Cuba. 

We conducted this performance audit from September 2011 to January 
2013 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.  

[End of section]  

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

Note: GAO received comments from USAID on November 21, 2012 for the 
Sensitive But Unclassified version of this report. 

USAID: 
From The American People:  

David Gootnick: 
Director, International Affairs and Trade: 
Government Accountability Office: 
Washington, DC 20548:  

Dear Mr. Gootnick:  

I am pleased to provide the formal response to the Government 
Accountability Office (GAO) draft report entitled "Cuba Democracy 
Assistance: USAID's Program Is Improved, but State Could Better Manage 
Its Implementing Partners" for the U.S. Agency for International 
Development (USAID).  

The enclosed USAID comments are provided for incorporation with this 
letter as an appendix to the final report.  

Thank you for the opportunity to respond to the GAO draft report and 
for the courtesies extended by your staff in the conduct of this audit 
review.  

Sincerely,  

Signed by:  

Angelique M. Crumbly: 
Acting Assistant to the Administrator: 
Bureau for Management: 
U.S. Agency for International Development:  

Enclosure: a/s.  

[End of letter]  

USAID Comments on GAO Draft Report:  

USAID's Program Is Improved, but State Could Better Manage Its 
Implementing Partners:  

USAID remains committed to the Cuban people by providing humanitarian 
support to political prisoners and their families, building civil 
society and expanding democratic space, and facilitating the 
information flow in, out, and within the island.  

We are pleased that the draft report does not present any 
recommendations for USAID. It is a challenge to implement assistance 
programs in countries where USAID does not have dedicated staff in-
country and we appreciate your recognition of our efforts. While no 
response or further action is required from USAID, we would like to 
take this opportunity to underscore our ongoing commitment to ensuring 
that Cuba democracy programs managed by USAID receive the appropriate 
oversight and management to minimize waste and mismanagement while 
ensuring the maximum impact on the ground in Cuba.  

As the current draft report notes, "Since 2008, USAID has worked to 
improve performance and financial monitoring of its Cuba program 
partners," we are proud of the continuous progress that USAID has 
achieved since your previous reports, "U.S. Democracy Assistance for 
Cuba Needs Better Management and Oversight" (2006) and "Continued 
Efforts Needed to Strengthen USAID's Oversight of U.S. Democracy 
Assistance for Cuba." (2008). USAID has instituted rigorous 
programmatic and financial auditing processes and made the following 
enhancements to program management:  

* Ensured that all grants and contracts are awarded competitively;  

* Hired additional staff in USAID Washington to manage the program;  

* Dedicated additional resources to conduct financial auditing and 
monitoring of grantees;  

* Instituted the practice of conducting pre-award audits on 
organizations with limited or no experience managing USAID funded 
projects;  

* Increased coordination with Department of State including USAID-
sponsored quarterly grantee coordination meetings to discuss program 
activities and eliminate the risk of overlap. 

Financial oversight measures have led to the identification of $6.8 
million in questioned costs. Of those amounts, $5.1 million in 
questioned costs have been adequately resolved; and $1.7 million in 
questioned costs are in the process of being resolved. Overall, there 
was approximately $50,000 in refunded amounts to USAID. Systematic 
monitoring and evaluation help us establish targets, monitor progress, 
and determine ways to improve our programs.  

We appreciate your recognition of our program achievements. 

[End of section]  

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

United States Department of State: 
Comptroller: 
1969 Dyess Avenue: 
Charleston, SC 29405:  

January 17, 2013:  

Dr. Loren Yager: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001:  

Dear Dr. Yager:  

We appreciate the opportunity to review your draft report, "Cuba 
Democracy Assistance: USAID's Program Is Improved, but State Could 
Better Monitor Its Implementing Partners" GAO Job Code 320959.  

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report.  

If you have any questions concerning this response, please contact 
Katrina Fotovat, Deputy Director, Bureau of Democracy, Human Rights 
and Labor at (202) 632-2105.  

Sincerely,  

Signed by:  

James L. Millette:  

cc: 
GAO: David Gootnick; 
DRL: Michael Kozak; 
WIIA: Liliana Ayalde; 
State/OIG: Evelyn Klemstine.  

[End of letter]  

Department of State Comments on GAO Draft Report:  

Cuba Democracy Assistance: USAID's Program is Improved, but State 
Could Better Monitor Its Implementing Partners (GA0-13-285, GAO Code 
320959):  

Thank you for allowing the Department of State (Department) the 
opportunity to comment on the draft report Cuba Democracy Assistance: 
USAID's Program is Improved, but State Could Better Monitor Its 
Implementing Partners.  

The Department appreciates the professionalism with which GAO 
conducted program audit meetings, data collection, and analysis over 
the past year and GAO's stated willingness to incorporate the 
Department's technical comments into the final GAO report. The 
Department also thanks the GAO for handling with care the sensitive 
details of the Cuba Democracy Programs.  

The GAO's report makes two recommendations. The Department concurs 
with both of them.  

First, GAO recommends that the Department utilize a risk-based 
approach for program audits. The Department agrees with this 
recommendation and notes that it is already using a risk-based 
approach that considers prior financial compliance issues, internal 
organizational administrative capacity, and the value of awards. The 
Department believes that the utilization of a risk-based approach to 
program audits is essential for effective financial oversight. For 
example, the Department has already procured an external auditor to 
conduct such reviews incorporating risk assessment and has instituted 
enhanced financial monitoring and oversight through increased site 
visits and other mechanisms. The Department also notes that the Bureau 
of Administration (A) has not been able to conduct internal financial 
controls reviews as planned due to staffing turnover and constraints, 
and is evaluating staffing and audit requirements to address 
oversight.  

Second, the GAO recommends providing clear guidance to implementing 
partners regarding requirements for approval of the use of 
subpartners, and that the Department should monitor implementing 
partners to ensure that they adhere to these requirements. The 
Department agrees with the recommendation and has been taking action 
to address this issue since prior to GAO's sharing of the draft report 
with the Department. For example, the Bureau of Democracy, Human 
Rights, and Labor (DRL) and the Bureau of Western Hemisphere Affairs 
(WHA) plan to conduct grantee meetings. Among other information, we 
will provide an overview of award requirements, including compliance 
with applicable laws and regulations, limitations on expending U.S. 
Government funds, and an orientation on resources and technical 
support available. The Department has also taken action over the last 
few years to improve the programming process and program monitoring, 
including hiring regionally experienced technically certified program 
officers. We have increased guidance and standardization with regards 
to monitoring and evaluation.  

Thank you for acknowledging improvements in the Cuba program since the 
GAO's initial report in November 2006. The Department has worked hard 
to strengthen the program, which provides vital assistance to support 
the desire of the Cuban people to freely determine their own future.  

Thank you again for the opportunity to respond to the GAO draft report 
and for the courtesies extended by your staff in the conduct of this 
review. 

[End of section]  

Appendix IV: GAO Contact and Staff Acknowledgments:  

GAO Contact:  

David Gootnick, (202)512-3149 or gootnickd@gao.gov:  

Staff Acknowledgments:  

In addition to the contact named above, Leslie Holen, Assistant 
Director; Elisabeth Helmer, Heather Latta, Joshua Akery, Laura Bednar, 
Beryl Davis, David Dayton, David Dornisch, Ernie Jackson, Crystal 
Lazcano, John Lopez, Reid Lowe, and Kim McGatlin provided significant 
contributions to the work. Etana Finkler and Jeremy Sebest provided 
technical assistance. 

[End of section]  

Footnotes:  

[1] The Cuban Democracy Act of 1992 (Pub. L. No. 102-484, Div. A, Tit. 
XVII) and the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act 
of 1996 (Pub. L. No. 104-114, commonly known as the Helms-Burton Act) 
authorize assistance and other support for individuals and independent 
nongovernmental organizations (NGOs) to promote peaceful, nonviolent 
democratic change in Cuba through various types of democracy-building 
efforts. Appropriations are provided through the annual Department of 
State, Foreign Operations, and Related Programs Appropriations Act, 
generally in the Economic Support Fund account.  

[2] For the purposes of our review, partners include contractors, 
grantees, and recipients of cooperative agreements. Awardees include 
recipients of grants and cooperative agreements. Subpartners include 
recipients of subawards (subgrants, grants under contract, 
consultants, etc.) and subcontracts. Program beneficiaries are the 
ultimate targets of program assistance, including human rights and 
democracy advocates on the island, as well as Cuban civil society 
actors.  

[3] See GAO, Foreign Assistance: U.S. Democracy Assistance for Cuba 
Needs Better Management and Oversight, [hyperlink, 
http://www.gao.gov/products/GAO-07-147] (Washington, D.C.: Nov. 15, 
2006); and GAO, Foreign Assistance: Continued Efforts Needed to 
Strengthen USAID's Oversight of U.S. Democracy Assistance for Cuba, 
[hyperlink, http://www.gao.gov/products/GAO-09-165] (Washington, D.C.: 
Nov. 24, 2008). These reports focused primarily on assistance provided 
by USAID's Latin American and Caribbean Bureau. A classified version 
of the November 2006 report was published in May 2007. 

[4] Internal controls comprise the plans, methods, and procedures used 
to meet missions, goals, and objectives and, in doing so, support 
performance-based management. 

[5] A nonprobability sample is not randomly selected, but rather is 
selected based on the use of a set of key criteria; also, it is not a 
large enough sample for findings to be generalizable to the full 
population of partners. 

[6] The United States does not have an embassy in Cuba, but USINT 
provides services including consular services and public diplomacy. 

[7] However, staff at USINT have a role in overseeing program efforts 
that are funded by State's Bureau of Western Hemisphere Affairs.  

[8] The Office of Acquisitions Management is the primary office within 
the Bureau of Administration involved in these functions. In addition, 
there are other bureaus and offices that have administrative and 
oversight functions for State's Cuba program.  

[9] [hyperlink, http://www.gao.gov/products/GAO-07-147]. 

[10] NED was not included in the scope of this review, because it is 
not a U.S. government agency and because USAID and State provide the 
majority of Cuba democracy assistance. 

[11] The overall goal of the Cuba program is laid out in USAID and 
State's most recent performance plan report for fiscal year 2011. This 
report also notes that the Cuba program is focused on advancing 
democracy and improving human rights conditions by supporting efforts 
to promote democratic reforms in Cuba, and promoting increased respect 
for human rights and fundamental freedoms in Cuba. State officials 
noted that State/DRL Cuba program efforts focus on civil society and 
human rights, including freedom of information as well as workers' and 
women's rights. 

[12] USINT officials noted that, during a crackdown in 2003 known as 
the "Black Spring," the Cuban government arrested 75 dissidents. All 
of the dissidents have since been released, with many exiled to Spain. 
According to the USINT officials, in the past 2 to 3 years the Cuban 
government has shifted away from sentencing convicted dissidents to 
long prison terms; instead, the government now is generally detaining 
dissidents for shorter periods of time. Officials added that as of 
January 2012 there were several dozen political prisoners in Cuba, but 
that it is difficult to ascertain exact numbers as there are no 
official statistics. 

[13] President Bush established the Commission for Assistance to a 
Free Cuba in October 2003 to identify (1) ways in which the U.S. 
government could hasten the end of the Castro dictatorship and (2) 
U.S. programs to assist the Cuban people during a transition to 
democracy. The commission's July 2006 report recommended providing $80 
million over 2 years to increase support for Cuban civil society, 
disseminate uncensored information to Cuba, expand international 
awareness of conditions in Cuba, and help realize a democratic 
transition in Cuba. The report also recommended subsequent annual 
funding of at least $20 million until the end of the Castro regime.  

[14] State officials stated that they do not believe this reduction 
will affect program efficacy. 

[15] The agencies have obligated 81 percent of these funds to partner 
organizations to implement program assistance; the agencies used the 
remainder of funding for expenses such as program administration and 
procurement of materials for distribution.  

[16] USAID/OTI's funding supported the award and oversight of one 
grant and one contract. According to USAID/OTI officials, USAID/OTI 
does not plan to continue its Cuba program activities, which were 
envisioned from their inception to be temporary. The office's programs 
are generally intended to provide short-term assistance to take 
advantage of windows of opportunity to build democracy and peace. 

[17] This average amount does not include additional funding that 
State/DRL has transferred to NED, which totaled $14.4 million from 
fiscal years 2005 to 2011.  

[18] Cuba-specific NGOs focus only on Cuba; worldwide or regional 
organizations, comprising both NGOs and for-profit companies, focus on 
multiple countries. Although most Cuba funds have been awarded through 
grants or cooperative agreements to NGOs, USAID has also awarded 
contracts to two companies that operate worldwide. All universities 
that have received program funding are based in the United States.  

[19] USAID and State awarded most program funding through cooperative 
agreements and grants, respectively. In terms of annualized funding, 
USAID's largest cooperative agreement was for $6.7 million over 4 
years, and State's largest grant was for $6.1 million over 3.25 years. 
Only two contracts were awarded, both by USAID in 2008, one for $11.6 
million over 3.75 years and the other for $6.9 million over 2.5 years. 
Since 2006, most USAID and State awards and contracts have resulted 
from openly competed solicitation processes.  

[20] [hyperlink, http://www.gao.gov/products/GAO-09-165]. 

[21] We reviewed selected characteristics--including the use of 
subpartners--for all of USAID's and State's 29 awards and contracts 
that were active in fiscal year 2011, funded with appropriations from 
fiscal years 2007 through 2009. These awards and contracts were 
awarded to 22 partners.  

[22] According to USAID and State legal officials, the Foreign 
Assistance Act of 1961, as amended, is the primary authority for both 
USAID's and State's efforts to provide foreign assistance to promote 
democracy in Cuba. These officials stated that because of prohibitions 
on assistance to certain countries and other restrictions in the act 
applicable to Cuba, "notwithstanding authority" is needed to provide 
assistance to individuals and independent groups in Cuba to support 
democracy-building efforts."Notwithstanding authority" allows agencies 
to carry out activities abroad regardless of country prohibitions or 
certain procurement regulations, personnel regulations, competitive 
process standards, or other restrictions that would otherwise prohibit 
or restrict programming. Both section 1705 of the Cuban Democracy Act 
and section 109(a) of the Helms-Burton Act authorize the provision of 
assistance "notwithstanding any other provision of law." See 22 U.S.C. 
§ 6004(a) and 22 U.S.C. § 6039(a). 

[23] For example, section 7034(m) of the Consolidated Appropriations 
Act of 2010 (Pub. L. No. 111-117) states that the term "promotion of 
democracy" means programs that support good governance, human rights, 
independent media, and the rule of law, and otherwise strengthen the 
capacity of democratic political parties, governments, nongovernmental 
organizations and institutions, and citizens to support the 
development of democratic states, institutions, and practices that are 
responsive and accountable to citizens.  

[24] Under Treasury regulations at 31 C.F.R. Part 515, general 
licenses authorize certain types of transactions in which Cuba or a 
Cuban national has an interest, such as certain humanitarian 
assistance, without the need to apply for a specific license on a case-
by-case basis. By statute, informational materials may be exported to 
Cuba without a license. In addition, USAID and State legal officials 
noted that USAID and State/DRL both have specific licenses that may 
extend to implementing organizations and individuals under the program. 

[25] We selected a nonprobability, nongeneralizable sample of six 
USAID and State implementing partners and 11 of their subpartners, to 
assess performance and financial monitoring and oversight of their 
awards and contracts. These six partners were among the top 15 
recipients of program funding awarded in fiscal years 2007 through 
2010 and represented about 60 percent of funding for awards active in 
fiscal year 2011.  

[26] The statutory framework for performance management of U.S. 
government programs is contained in the Government Performance and 
Results Act of 1993 (GPRA), Pub. L. No. 103-62, as amended by the GPRA 
Modernization Act of 2010, Pub. L. No. 111-352.  

[27] USAID now uses the term "performance management plan" to refer to 
monitoring and evaluation plans. USAID regulations require that every 
country program and its partners develop and maintain a comprehensive 
performance management system.  

[28] According to USAID regulations, these reports should compile 
information about activities that occurred under the award or contract 
during the reporting period, including any activities carried out by 
subpartners, if applicable.  

[29] We reviewed M/E plans to determine if they had clearly defined 
indicators, targets set for each indicator, and data collection 
methods specified for each indicator, as these were some basic 
elements of M/E plans as defined in both USAID and State guidance. To 
review progress reports, we determined whether progress was clearly 
reported against each indicator identified in the M/E plans, as such 
reporting allows the agency to see the progress being made toward the 
awards' and contracts' identified objectives, according to USAID and 
State guidance.  

[30] Four of the partners did this through organizing their reporting 
against targets into indicator tracking tables, while another partner 
provided weekly quantitative updates on progress against targets to 
USAID/OTI through an online database.  

[31] In addition, in 2007, USAID developed and began to implement a 
structured approach to monitoring meetings with its partners through 
which USAID collects information on partner performance, such as more 
in-depth information on activities and planning. Also, since December 
2009, USAID/LAC has convened quarterly coordination meetings for all 
of USAID's and State's Cuba program partners to provide guidance and 
share experiences and program implementation strategies. According to 
USAID officials, since December 2010, USAID and State have also used 
the quarterly partner meetings to obtain information orally about 
which beneficiaries in Cuba receive goods and services, to identify 
any potential duplication of beneficiaries across partners. Since 
partners often consider the names of beneficiaries as sensitive, they 
do not generally include names or other identifying information about 
beneficiaries in their progress reports.  

[32] During these data quality audits, the M/E contractor plans to 
review whether partners document lists of specific beneficiaries 
counted against any particular indicators, either with their specific 
names or, given program sensitivities, some other form of 
documentation to show that reported numbers are accurate and do not 
include any duplication.  

[33] Requests for proposals (RFPs) are used in negotiated acquisitions 
to communicate Government requirements to prospective contractors and 
to solicit proposals. (See The Federal Acquisition Regulation § 
15.203.) 

[34] Similar to the progress reports submitted to USAID, State's 
partners must submit reports that compile information about all 
activities that occurred under their award during that quarter, 
including any activities carried out by subpartners, if applicable. 
Also, State officials may follow up with partners for more information 
by phone, e-mail, or, less frequently, in-person meetings.  

[35] In addition, USINT officials will review the quarterly reports 
for these awards to ensure they are accurate. 

[36] One of the awards in our sample, the third award to Partner #3 as 
listed in table 4, originated from the RFP State/DRL issued in fiscal 
year 2010, while the other three State/DRL awards in our sample were 
from the RFP State/DRL issued in fiscal year 2009.  

[37] No State/WHA partners will be reviewed or trained by this M/E 
contractor. 

[38] Partners are responsible for managing and monitoring each 
project, program, subaward, function, or activity supported by their 
award. 

[39] These trip reports documented information such as the purpose of 
the trip, locations visited, number of individuals receiving 
assistance in Cuba, details on assistance provided, and traveler 
assessments of the situation on the island. 

[40] We interviewed 11 subpartners under the six partners in our 
sample, nine of which were under USAID awards or contracts and two of 
which were under State awards. Some factors that we considered in our 
selection of subpartners included the amount of funding obligated to 
and the type of activity performed by the subpartner. Table 5 in 
appendix I describes characteristics of the six sample partners and 
their subpartners that we reviewed.  

[41] We recommended that USAID strengthen its financial monitoring of 
its Cuba program in [hyperlink, 
http://www.gao.gov/products/GAO-07-147] and [hyperlink, 
http://www.gao.gov/products/GAO-09-165]. According to GAO's Standards 
for Internal Control in the Federal Government ([hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1], Washington, D.C.: 
November 1999), for financial monitoring of partners, agencies' 
internal controls should be designed to provide for ongoing monitoring 
in the course of normal operations. Prior to 2008, the only ongoing 
financial monitoring that USAID performed during active awards 
involved reviewing high-level summaries of expenditures included in a 
standard federal financial report, known as Form 425, which partners 
submit quarterly. 

[42] In addition to financial internal controls reviews, the external 
auditor has performed other reviews, as requested, such as compliance 
and financial systems reviews. 

[43] USAID's Management Bureau performs preaward and follow-up audits. 
USAID's Inspector General also performs periodic audits of some 
ongoing awards and contracts.  

[44] At each partner, the external auditor reviewed nonpayroll 
disbursements that occurred during a certain review period, ranging 
from one quarter to over a year. As of September 2012, according to 
USAID, 75 percent of questioned costs were adequately resolved and 
USAID had received $50,000 in refunded costs, while the remaining 
questioned costs were in the process of being resolved.  

[45] According to both USAID and State Department regulations (22 
C.F.R. § 226.45 and 22 C.F.R. § 145.45), some form of cost or price 
analysis shall be made and documented in the procurement files in 
connection with every procurement action. Price analysis may be 
accomplished in various ways, including the comparison of price 
quotations submitted, market prices and similar indicia, together with 
discounts. Cost analysis is the review and evaluation of each element 
of cost to determine reasonableness, allocability, and allowability. 

[46] Our selected sample consisted of six partners. Out of the six 
selected partners, one had an award solely with State, three had 
awards solely with USAID, and two had awards with both State and USAID 
during the period from which we sampled. See table 5 in appendix I for 
further information on the six selected partners. During our review, 
we examined partners' policies and procedures, interviewed key 
officials knowledgeable of the partners' financial management 
processes, and then tested a nongeneralizable sample of transactions 
related to program expenditures under the partners' awards and 
contracts in our sample. Specifically, we verified that the 
transactions made were supported with adequate documentation; tested 
the partners' policies and procedures relating to approval of 
payments, segregation of duties, and subpartner approval; and reviewed 
the partners' processes to ensure that the payments made were 
allowable, allocable, and reasonable. We also verified that 
expenditures made were within limits approved in the contracts and 
agreements negotiated with the agencies and that payments made were in 
accordance with the scope of work established in those contracts and 
agreements. 

[47] Specifically, we found that the USAID/LAC partner overcharged for 
overhead expenses, such as facility rental expenses and office supply 
purchases, because the partner included overhead in its labor rate 
multiplier (a negotiated multiplier applied to direct salary costs), 
while simultaneously directly charging these actual costs. We were 
unable to determine the total amount of overcharges caused by this 
double billing because the partner declined to provide us with 
information necessary to complete this calculation. In addition, we 
identified almost $1,000 in overbilled labor charges by this partner. 
In October 2012, we informed USAID of this issue. 

[48] During the reviews, Bureau of Administration officials review 
financial records, documentation of expenditures, and the adequacy of 
financial and other administrative systems. The review allows State to 
trace financial statement balances through the recipient's general 
ledger, cash books, and other summary journals to the original 
detailed accounting transactions and their supporting documentation 
for audit trail purposes. 

[49] Other than performing financial internal control reviews, State's 
main tool for financial oversight of its partners is to review the 
high-level summary of expenditures reported on their quarterly Form 
425 submissions. These forms are reviewed by Bureau of Administration 
officials and officials in the relevant programming bureau, State/DRL 
or State/WHA. State uses the information that their partners report on 
Form 425 to ensure that payments are commensurate with progress and 
that the partners do not maintain large unused cash balances.  

[50] The external auditor will review approximately 9 of State/DRL's 
12 current and new partners. 

[51] Our selected sample consisted of six partners. Out of the six 
partners we selected for further review, one had an award solely with 
State, three had awards solely with USAID, and two had awards with 
both State and USAID during the period from which we sampled (see 
table 5 in appendix I for further information on these partners). 
During our review, we examined partners' policies and procedures, 
interviewed key officials knowledgeable of the partners' financial 
management processes, and then tested a nongeneralizable sample of 
transactions related to program expenditures under the partners' 
awards and contracts in our sample. Specifically, we verified that the 
transactions made were supported with adequate documentation; tested 
the partners' policies and procedures relating to approval of 
payments, segregation of duties, and subpartner approval; and reviewed 
the partners' processes to ensure that the payments made were 
allowable, allocable, and reasonable. We also verified that 
expenditures made were within limits approved in the contracts and 
agreements negotiated with the agencies and that payments made were in 
accordance with the scope of work established in those contracts and 
agreements. 

[52] Because of overlap in partners under State's and USAID/LAC's 
programs, nine of State's partners active in fiscal years 2011 and 
2012 have been reviewed by USAID/LAC's external auditor.  

[53] According to Office of Management and Budget (OMB) regulations 
for awardees and Federal Acquisition Regulations for contractors, 
partners are responsible for financial monitoring of subpartners. 
Partners should manage and monitor the costs incurred by subpartners 
to ensure all costs expended are reasonable, allocable, and allowable.  

[54] One partner noted that this 100 percent threshold was more than 
it requires of many of its subpartners, but that it maintained this 
requirement for its Cuba program given its high risk and monitoring 
challenges. 

[55] For more information on these subpartners and how they were 
selected, see appendix I. 

[56] The price of a fixed-price subcontract is set before the 
subcontract is signed and is not subject to any adjustment on the 
basis of actual costs. 

[57] We were not able to substantiate the assertions of these two 
partners based on the documentation provided. According to USAID 
officials, they are currently taking steps to address issues relating 
to lack of detailed information on cost/price analysis identified by 
USAID's external auditor for some USAID awards. 

[58] OMB regulations state in 22 C.F.R. § 215.25(c)(8) that a partner 
shall request prior approval from the federal awarding agency for the 
subaward, transfer, or contracting out of any work performed under an 
award, unless described in the application and funded in the approved 
award. A similar agency-specific USAID regulation is at 22 C.F.R. § 
226.25(c)(8).  

[59] An RFA is a type of solicitation notice in which an organization 
announces that grant funding is available. 

[60] The USAID/LAC contract we reviewed required the contractor to 
develop USAID-approved guidelines, including criteria for selecting 
subpartners, and to obtain USAID approval for individual subawards and 
subcontracts. The technical proposal for the contract also stated that 
a USAID representative would participate in the contractor's 
subpartner proposal review process, and representatives of the 
contractor noted that they also submitted copies of all final 
subpartner agreements to USAID for approval. For the USAID/OTI 
contract, USAID/OTI worked closely with the contractor to select and 
approve all subpartners, in accordance with the contract terms. 

[61] These Standard Terms and Conditions apply to all overseas federal 
assistance awards made by State.  

[62] No differentiation is made in the Standard Terms and Conditions 
between requirements for the approval of subawards or subcontracts, 
including those for the use of consultants to perform work toward 
award objectives. 

[63] These requirements for preapproval of consultants reflect factors 
contained in OMB, Circular A-122: Cost Principles for Non-profit 
Organizations, which lays out the types of information that an agency 
may use to determine that consultant fees are reasonable and allowable 
under an award, such as the nature and scope of the service to be 
performed, the qualifications of the individual or organization 
performing the service, and their customary fees. 

[64] We reviewed the 18 awards that were State's portion of the 29 
Cuba program awards and contracts funded from fiscal years 2007 
through 2009 appropriations that were active in fiscal year 2011. 

[65] The National Endowment for Democracy (NED), an independent, 
nongovernmental organization, funds programs to promote democracy in 
Cuba through both direct congressional appropriations and with funding 
that it receives through State/DRL. NED was not included in the scope 
of this review, because it is not a U.S. government agency and because 
USAID and State provide the majority of Cuba democracy assistance. 

[66] A nonprobability sample is not randomly selected, but rather is 
selected based on the use of a set of key criteria; also, it is not a 
large enough sample for findings to be generalizable to the full 
population of partners. 

[67] See GAO, Standards for Internal Control in the Federal 
Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999).  

[End of section]  

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Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, DC 20548.  

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