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entitled 'Foreign Assistance: U.S. Democracy Assistance for Cuba Needs
Better Management and Oversight' which was released on November 15,
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Report to Congressional Requesters:
United States Government Accountability Office: GAO:
November 2006:
Foreign Assistance:
U.S. Democracy Assistance for Cuba Needs Better Management and
Oversight:
GAO-07-147:
GAO Highlights:
Highlights of GAO-07-147, a report to congressional requesters
Why GAO Did This Study:
U.S. law authorizes aid for nonviolent democratic change in Cuba. From
1996–2005, State and USAID awarded grants totaling $74 million to
support such change. A presidential commission recently recommended
increasing funding for these efforts.
This report examines (1) agency roles in implementing this aid and
selection of grantees; (2) types of aid, recipients, and methods of
delivery reported in 2005; (3) oversight of grantees; and (4) data
about the impact of this aid.
To address these objectives, we analyzed the activities and internal
controls, and USAID’s oversight and management of, 10 grantees with
about 76 percent (in dollars) of total active awards for Cuba democracy
aid. Our review focused on USAID because State’s first awards were not
made until mid-2005.
What GAO Found:
The Department of State (State) and the U.S. Agency for International
Development (USAID) implement U.S. democracy assistance for Cuba
through an interagency process. However, communication between these
agencies was sometimes ineffective, most critically about grantees’ on-
island activities. About 95 percent ($62 million) of USAID’s total
awards were made in response to unsolicited proposals; however, after
2004, both USAID and State used formal competition to select grantees.
Dissidents in Havana said that U.S. assistance provided moral support
and enhanced their ability to work for democracy. In 2005, the 10
grantees we reviewed delivered humanitarian and other aid, training,
and information to human rights and political activists, independent
librarians and journalists, and political prisoners and their families.
Assistance shipped to Cuba included food, medicine, clothing, office
equipment and supplies, shortwave radios, books, and newsletters.
Grantees also conducted international advocacy for human and workers’
rights in Cuba and planned for a future democratic transition. Given
the Cuban government’s repressive policies and opposition to U.S.
democracy assistance, grantees employed a range of discreet delivery
methods that varied in terms of security, flexibility, and cost. The
U.S. Interests Section in Havana, Cuba, a State post, has played an
important role in distributing the aid provided by some grantees.
Internal controls—both over the awarding of Cuba program grants and
oversight of grantees—do not provide adequate assurance that the grant
funds are being used properly and that grantees are in compliance with
applicable laws and regulations. Preaward reviews of grantees were not
always completed before awards, and USAID did not follow up adequately
after awards to correct weaknesses in grantee policies, procedures, and
accounting systems identified by these reviews. In addition,
standardized grant agreements did not provide sufficient details to
support program accountability or the correction of the weaknesses
identified by preaward reviews. The Cuba program office also did not
adequately manage at-risk grantees and lacked formal review or
oversight procedures for monitoring grantee activities. We performed
limited testing for 10 grantees and identified questionable
expenditures and significant internal control weaknesses with 3
grantees that USAID had not detected.
The Cuban government’s active opposition to U.S. democracy assistance
presents a challenging operating environment for State and USAID.
Although USAID and its grantees have some evaluation and anecdotal
information about program results, they have focused on measuring and
reporting program activities, such as the volume of food, medicine, or
books sent to Cuba. USAID recently took several steps to collect better
information about program results, such as increasing staff expertise
and meeting more regularly with grantees.
What GAO Recommends:
GAO recommends that State and USAID work jointly to improve interagency
communication about Cuba assistance, and that USAID improve its
management and oversight of grantees.
State and USAID officials said that they were taking steps to improve
interagency communications. USAID said it was taking steps to improve
the agency’s management, monitoring, and evaluation of democracy
assistance to Cuba.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-147].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact David Gootnick at (202)
512-3149 or gootnickd@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
U.S. Assistance Supports Civil Society; Most Awards Were Based on
Unsolicited Proposals:
Grantees Provided Assistance and Information to Recipients Using
Several Methods; USINT Played Active Role:
Monitoring and Oversight of Cuba Program Grants Did Not Provide
Adequate Assurance That Funds Were Used Properly:
Some Data Available about the Impact of U.S. Assistance:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology 52:
Appendix II: Comments from the Department of State 57:
Appendix III: Comments from the U.S. Agency for International
Development 58:
Appendix IV: GAO Contacts and Staff Acknowledgments 59:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: U.S. Policy Framework Identified in the Commission for
Assistance to a Free Cuba's 2004 Report 12:
Table 2: Key Roles and Responsibilities for U.S. Democracy Assistance
for Cuba 13:
Table 3: State and USAID Program Activities for Cuba Democracy
Assistance 17:
Table 4: State and USAID Cuba Democracy Assistance Grantees and Awards,
1996-2005 18:
Table 5: Assistance to Individuals and Groups in Cuba in 2005 23:
Table 6: Recipients of U.S. Democracy Assistance in Cuba in 2005 26:
Table 7: Internal Control Standard Deficiencies Observed at Three
Grantees, March-April 2006 39:
Table 8: Evaluations of USAID's Cuba Democracy Assistance, 1996-2005
42:
Table 9: State and USAID Grantees and Awards that GAO Reviewed 54:
Figure:
Figure 1: Modifications in Total Authorized Length and Amount for 12
USAID Cuba Democracy Assistance Agreements, November 1997 to May 2006
21:
Abbreviations:
DRL: Bureau of Democracy, Human Rights, and Labor:
IRS: U.S. Internal Revenue Service:
NED: National Endowment for Democracy:
NGO: nongovernmental organization:
OMB: Office of Management and Budget:
RFA: request for application:
USAID: U.S. Agency for International Development:
USINT: U.S. Interests Section, Havana, Cuba:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
November 15, 2006:
The Honorable Jeff Flak:
Vice Chairman:
The Honorable William D. Delahun:
Ranking Minority Member:
Subcommittee on Oversight and Investigations: Committee on
International Relations: House of Representatives:
The Cuban government systematically restricts nearly all political
dissent, denying its citizens basic rights to free expression,
association, and assembly. The Cuba Democracy Act of 1992[Footnote 1]
and the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of
1996[Footnote 2] authorized the President to provide assistance and
other support for individuals and independent nongovernmental
organizations (NGO) to promote peaceful, nonviolent democratic change
in Cuba through various types of democracy-building efforts. From 1996-
2005,[Footnote 3] the U.S. Agency for International Development (USAID)
awarded 40 grants or cooperative agreements totaling $65.4
million[Footnote 4] to support the development of civil society in
Cuba. In 2005, the Department of State (State), through its Bureau of
Democracy, Human Rights, and Labor (DRL), awarded four grants totaling
about $8.1 million to support a range of democracy assistance
activities for Cuba. In 2004 and 2006, the Commission for Assistance to
a Free Cuba[Footnote 5] recommended increasing funding for this type of
assistance.
At your request, this report examines (1) the roles and objectives of
the agencies implementing U.S. democracy assistance targeted at Cuba,
and the funding, characteristics, and selection of the
grantees[Footnote 6] receiving awards under this program; (2) the
types, amounts, and recipients of this assistance in 2005 and the
methods used to deliver it; (3) USAID's monitoring and oversight of
these grantees; and (4) the availability of data to evaluate whether
U.S. assistance has achieved its goals. We plan to issue a classified
version of this report that provides additional information about the
methods used to deliver U.S. assistance to Cuba, steps taken to reduce
losses of assistance shipped to the island, and some of the recipients
of U.S. assistance in Cuba.
In conducting this review, we analyzed selected characteristics of the
34 grantees that received one or more of 44 State or USAID awards for
this assistance from 1996-2005. We also analyzed the reported
activities, assistance delivered, and management and internal controls
for 10 USAID grantees with 14 awards active in 2005[Footnote 7]
(representing about 76 percent of total State and USAID awards for Cuba
democracy assistance in terms of dollars). We focused our review on
USAID because State did not award its first grants until mid-2005 and
on grantees with several years experience working with USAID on Cuba
democracy assistance. At USAID and State in Washington, D.C., and at
the offices of grantees in our sample in Washington, D.C., and Miami,
Florida, we analyzed key records and interviewed agency officials and
grantees to understand U.S. and agency assistance objectives and the
processes used to select and monitor grantees and evaluate program. At
the Departments of Treasury (Treasury) and Commerce (Commerce), we
discussed export licenses required for this assistance. We also
interviewed officials at the National Endowment for Democracy (NED), a
private nonprofit corporation funded through State's annual
appropriation that supports democracy promotion in Cuba and other
nations. We conducted fieldwork in Havana, Cuba, working out of the
U.S. Interests Section (USINT), a State post. In Havana, we interviewed
U.S. officials, leading dissidents, and foreign-embassy officials and
observed post activities. We conducted our work from August 2005
through November 2006 in accordance with generally accepted government
auditing standards. See appendix I for a more detailed explanation of
our scope and methodology.
Results in Brief:
U.S. democracy assistance focused on Cuba is implemented through an
interagency process led by State and USAID. However, we found that
communication between these agencies about the implementation of this
assistance was sometimes ineffective. Most critically, since USAID does
not have staff in Cuba, the agencies had not established routine
communication links between USAID and USINT about the implementation
and monitoring of on-island activities. To support independent civil
society groups and individuals, State and USAID awarded 44 grants and
cooperative agreements between 1996 and 2005 to three types of
grantees: (1) democracy and human rights NGOs focused specifically on
Cuba, which received about 51 percent ($37.3 million) of the
assistance; (2) democracy and human rights NGOs with a worldwide or
regional focus, which received about 39 percent ($28.7 million); and
(3) universities, which received about 10 percent ($7.6 million). About
95 percent (about $61.9 million) of USAID's awards were made in
response to unsolicited proposals.[Footnote 8] All four of State's
awards and the remainder of USAID's awards were made competitively.
USAID modified over two-thirds of its 40 awards, increasing the
estimated program cost almost eight-fold--from about $6 million to
about $50 million--and extending program completion dates by an average
of about 3 years.
USAID reported that its Cuba program had provided a wide range of
democracy-related assistance from 1996-2006. Dissidents in Havana said
that this assistance provided moral support and enhanced their ability
to continue their pro-democracy work. The 10 grantees that we reviewed
in detail delivered significant amounts of humanitarian and material
assistance,[Footnote 9] as well as training, and information. The
recipients of this assistance included Cuban human rights activists,
political dissidents, independent librarians, journalists, and
political prisoners and their families. The grantees reported using
several methods to deliver assistance to the island. According to
grantees and U.S. officials, these methods involve different security,
flexibility, and cost considerations. Some grantees have taken steps to
reduce the risk of loss--due to theft or confiscation by the Cuban
government--of assistance shipped to Cuba. USINT has distributed
increased amounts of some types of democracy assistance since 2000.
USAID's internal controls over the awarding of Cuba program grants and
the oversight of grantees do not provide adequate assurance that the
grant funds are being used properly or that grantees are in compliance
with applicable laws and regulations. We found that some preaward
reviews of grantees were not completed before grant awards, and USAID
did not follow up adequately to correct deficiencies identified by
these reviews. In addition, the standardized language in grants and
cooperative agreements lacked the detail necessary to support program
accountability and the correction of grantee deficiencies identified
during preaward reviews. The Cuba program office did not adequately
identify, prioritize, or manage at-risk grantees and did not have
critical review or oversight procedures in place to monitor grantee
activities. We performed limited testing on 10 grantees and identified
questionable expenditures and significant internal control weaknesses
with 3 grantees that USAID had not detected. The program office also
lacked adequate policies and procedures for reviewing grantees'
compliance with cost-sharing provisions in grant agreements.
Additionally, USAID does not appear to routinely follow prescribed
closeout processes to identify and recover inappropriate expenditures
or unexpended funds. These weaknesses in agency policies and procedures
and in program office oversight allowed the significant internal
control deficiencies we found at 3 grantees to go undetected and
increased the risk of fraud, waste, abuse, and noncompliance with laws
and regulations in the USAID program. We referred the problems we
identified at these 3 grantees to the USAID Office of Inspector
General.
Some information is available about the impact or results of U.S.
democracy assistance targeted at Cuba. State and USAID face a difficult
operating environment that presents monitoring and evaluation
challenges. For example, USAID does not have staff in Cuba and under
Cuban law it is illegal for Cubans to cooperate with U.S. democracy
assistance activities. In this context, USAID and its grantees have
conducted some evaluations--such as an assessment of some independent
NGOs in Cuba receiving U.S. assistance. However, although some
anecdotal information about program results is available, evaluations
generally have been limited in number and scope. Instead, USAID and
grantees have largely focused on measuring and reporting program
activities, such as the volume of humanitarian assistance or the number
of books sent. Starting in mid-2005, USAID initiated several efforts to
collect better information about results, such as increasing staff
expertise and requiring intermediate program evaluations when grants
are modified.
In summary, U.S. efforts to support democratic change in Cuba face
several challenges. Some result from the difficult operating
environment, while others result from managerial weaknesses in the
program. To enhance the implementation of U.S. democracy assistance
targeted at Cuba, particularly in the context of the Commission for
Assistance to a Free Cuba's call to increase funding for these efforts,
this report recommends that the Secretary of State and USAID
Administrator work jointly to improve communication between responsible
State and USAID bureaus and offices and that the USAID Administrator
work to improve USAID's management and oversight of grantees.
In commenting on a draft of this report, State and USAID officials said
that they had begun taking steps to implement our recommendations.
State and USAID officials also provided technical comments, which we
have incorporated where appropriate.
Background:
Conditions in Cuba Pose Substantial Challenges for U.S. Assistance:
Conditions in Cuba--a hard-line Communist state that restricts nearly
all political dissent--pose substantial challenges to implementing,
monitoring, and evaluating democracy assistance. USAID does not work
cooperatively or collaboratively with the Cuban government, as it does
in most countries receiving U.S. democracy assistance.[Footnote 10] The
United States and Cuba do not have diplomatic relations, and the United
States maintains an embargo on most trade. USINT staff is restricted to
Havana.[Footnote 11] USAID does not have staff in Cuba, and Cuba
program office staff have been unable to obtain visas to visit the
island since 2002. Additionally, the range of Cuban partner
organizations is significantly limited by U.S. law, which generally
prohibits direct assistance to the Cuban government and NGOs with links
to the government or the Communist Party.
Cuban law prohibits citizens from cooperating with U.S. democracy
assistance activities authorized under the Cuban Liberty and Democratic
Solidarity Act, punishable with prison terms of up to 20 years. Tactics
for suppressing dissent include surveillance, arbitrary arrests,
detentions, travel restrictions, exile, criminal prosecutions, and loss
of employment. Neighborhood committees (known as Committees for the
Defense of the Revolution) monitor residents' activities; those
identified as dissidents are subject to intimidation (acts of
repudiation), including psychological and physical violence.
Independent groups, dissidents, and activists face constant harassment
and infiltration by Cuban government agents. In 2003, the Cuban
government arrested and sentenced 75 leading dissidents and activists
to terms of up to 28 years in prison.[Footnote 12] The Cuban government
accused some of these individuals of receiving assistance from USAID
grantees. A Cuban human rights group known as Damas de Blanco (Ladies
in White), formed after the 2003 crackdown, consists of dissidents'
wives, mothers, and sisters who peacefully protest for the
unconditional release of political prisoners.
There is no free press in Cuba, and independent journalists are
harassed and imprisoned.[Footnote 13] The Cuban government also
substantially restricts and controls the flow of information, routinely
monitoring international and domestic telephone calls and fax
transmissions. As of 2006, only about 200,000 Cubans out of a total
population of 11 million had been granted official access to the
Internet.[Footnote 14] The use of satellite dishes, radio antennas, fax
machines, and cellular telephones is restricted due to high costs,
laws, and the threat of confiscation. The customs service also
routinely monitors mail, freight shipments, and visitors' baggage for
materials with political content. Further, the government routinely
jams all external, non-Cuban broadcasts, including the U.S. government-
supported Radio and TV Martí broadcasts.
Commission Recommends Increased Assistance and Identifies U.S.
Objectives:
The Commission for Assistance to a Free Cuba was established by the
President to identify measures to help end the Castro dictatorship and
identify U.S. programs that could assist an ensuing transition. The
commission's May 2004 report[Footnote 15] recommended providing an
additional $36 million to USAID, State, and other agencies' grant
programs supporting Cuban civil society, as well as $5 million for
worldwide public diplomacy initiatives. The report also recommended the
creation of a transition coordinator for Cuba at State, a post created
and filled in 2005.
The commission's July 2006 report[Footnote 16] 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. The report also recommended subsequent annual funding of at
least $20 million until the end of the Castro regime. These funds would
be in addition to current funding for State and USAID democracy
assistance programs and Radio and TV Martí.[Footnote 17]
State and USAID officials said that the commission's 2004 report
provides the policy framework for their agencies' respective grant
programs (see table 1).
Table 1: Table 1: U.S. Policy Framework Identified in the Commission
for Assistance to a Free Cuba's 2004 Report:
Strategies:
* Empower Cuban civil society;
* Break the Cuban dictatorship’s information blockade;
* Deny resources to the dictatorship;
* Illuminate the reality of Castro’s Cuba;
* Encourage international diplomatic efforts to support civil society
and challenge the Castro regime;
* Undermine the regime’s succession strategy.
Source: The Commission for Assistance to a Free Cuba's May 2004 report
to the President.
[End of table]
U.S. Assistance Supports Civil Society; Most Awards Were Based on
Unsolicited Proposals:
State and USAID lead interagency efforts to provide democracy
assistance to independent civil society groups and individuals in Cuba.
However, we found weaknesses in the communications between State and
USAID regarding the implementation of this assistance. State and USAID
made awards to three types of grantees: Cuba-specific NGOs, NGOs with a
worldwide or regional focus, and universities. Prior to 2004, all USAID
awards were based on unsolicited proposals. In 2004-2005, USAID and
State used a competitive process to select grantees. Since the
program's inception, USAID extended the amount and length of about two-
thirds of the 40 grants and cooperative agreements it awarded.
State-and USAID-Led Interagency Process Implements U.S. Assistance:
Since 1996, State and USAID have led the implementation of U.S.
democracy assistance focused on Cuba. We observed weaknesses in
communication between responsible State and USAID bureaus and offices.
State's Office of Cuban Affairs (under the Bureau of Western Hemisphere
Affairs) and USAID's Cuba program office (under the Latin America and
Caribbean Bureau) have led the implementation of assistance programs
that support the development of democratic civil society in Cuba,
coordinating their activities primarily through an interagency working
group. This working group also includes representatives from the
National Security Council, Commerce (Bureau of Industry and Security,
Foreign Policy Controls Division), and Treasury (Office of Foreign
Assets Control).[Footnote 18]
USAID has funded democracy assistance grants and cooperative agreements
for Cuba since 1996. USAID's Cuba program is overseen by a director and
one junior officer. In 2005, State initiated a grant program for Cuba
democracy assistance through DRL. Headed by an assistant secretary, DRL
leads U.S. efforts to promote democracy, protect human rights and
international religious freedom, and advance labor rights globally. The
Director of U.S. Foreign Assistance (who serves concurrently as the
USAID Administrator) is responsible for coordinating State and USAID
democracy assistance worldwide, with continued participation in program
planning, implementation, and oversight from the various bureaus and
offices within State and USAID, and is developing a strategic framework
and procedures to ensure that programs match priorities.
Table 2 outlines the roles and responsibilities of key executive branch
agencies in providing democracy assistance to Cuba.
Table 2: Key Roles and Responsibilities for U.S. Democracy Assistance
for Cuba:
Interagency Working Group.
Organization/location: State and USAID, co-chairs Washington, D.C;
Roles/responsibilities:
* Provides overall policy direction;
* Reviews unsolicited USAID assistance proposals and makes award
recommendations.
State.
Organization/location: DRL;
Roles/responsibilities: [Empty].
Organization/location: Office for the Promotion of Human Rights and
Democracy Washington, D.C; Roles/responsibilities:
* Recommends State grant awards;
* Monitors the implementation of State grants.
Organization/location: Bureau of Western Hemisphere Affairs; Roles/
responsibilities: [Empty].
Organization/location: Office of Cuban Affairs Washington, D.C; Roles/
responsibilities:
* Co-chairs interagency working group on Cuba;
* Provides policy guidance;
* Reviews State and USAID assistance proposals;
* Principle liaison with State for USAID program.
Organization/location: USINT Havana, Cuba; Roles/responsibilities:
* Provides information on conditions in Cuba;
* Reviews State and USAID assistance proposals;
* Delivers some assistance to independent groups and individuals in
Cuba, including assistance provided by USAID- and State-funded
grantees;
* Conducts a range of other public diplomacy initiatives.
Organization/location: Cuba Transition Coordinator Washington, D.C;
Roles/responsibilities:
* Facilitates implementation of pro-democracy, civil-society building,
and public diplomacy projects;
* Continues regular planning for future transition assistance
contingencies;
* Coordinates the implementation of overall policy and programmatic
direction.
USAID.
Organization/location: Latin America and Caribbean Bureau; Roles/
responsibilities: [Empty].
Organization/location: Cuba Program Office Washington, D.C; Roles/
responsibilities:
* Co-chairs interagency working group on Cuba;
* Recommends USAID Cuba democracy assistance awards;
* Monitors the implementation of USAID grants and cooperative
agreements;
* Reviews State assistance proposals.
Source: GAO analysis of State, USAID, and other records.
Note: DRL reorganized in June 2006. State's Cuba democracy assistance
program now falls under the new Office of Asia and Western Hemisphere.
[End of table]
As the table shows, USINT plays an important role in implementing State
and USAID democracy assistance focused on Cuba. In addition to these
tasks, USINT administers immigration and refugee programs, maintains
regular contact with Cuban activists and other embassy officials, and
files reports regarding human rights abuses.
Effective internal control requires effective communication with key
stakeholders who have a significant impact on whether an agency
achieves its goals.[Footnote 19] However, during our fieldwork in
Havana and Washington, D.C., we found that communications were
sometimes ineffective between State bureaus and offices, USINT, and
USAID regarding the implementation of U.S. democracy assistance focused
on Cuba. Most critically (given that USAID does not have staff in Cuba
and the Cuba program office staff cannot visit the island), routine
communication links between USAID and USINT had not been established.
Specific examples include the following:
* USAID did not receive reports prepared by USINT assessing some
independent NGOs in Havana, although some of these organizations
received assistance from USAID grantees. These reports summarize the
observations made during USINT site visits and also recommended
adjustments in the level and type of assistance distributed to
individual NGOs. Given the lack of a USAID presence in Cuba,
information provided in these reports would improve USAID officials'
knowledge of how some assistance is being utilized.
* USAID's Cuba program director did not participate in the evaluation
and ranking of democracy assistance proposals submitted to State's DRL.
(He had an opportunity to provide comments after State's review panel
had met.) The director said that he potentially could have provided
important "lessons learned" about these proposals, based on almost a
decade of experience implementing assistance in Cuba. State officials
said that the omission of the USAID Cuba program director from the
technical review panels was an oversight and that DRL would take steps
to ensure USAID's participation on future Cuba panels.
* USINT officials said that they received limited information from
USAID about its grantees' on-island activities, such as specific groups
or individuals receiving U.S. support. The information these officials
had about such matters was based on direct contact with some grantees
and comments from dissidents. More complete information about grantee
activities would provide a basis for USINT to monitor and report more
systematically on groups and individuals receiving U.S. assistance.
* USINT officials said that they had little advance knowledge of the
types and amounts of assistance that USAID grantees expected them to
distribute. In addition, they said that some grantee-provided books and
other materials had been inappropriate or ill-suited for promoting
democracy in Cuba.[Footnote 20] These officials stated that U.S.
assistance would be more effective if they had more advance information
about--and input into--grantee shipments. USAID officials agreed that
better communication is needed to coordinate these activities.
In commenting on this report, State and USAID officials recognized the
benefits of improved interagency communication on Cuba democracy
assistance and noted that they were taking steps in this direction,
such as providing USAID program officials with access to classified
communications between State and USINT. According to the USAID Cuba
program director, access to classified communications should allow
better coordination with USINT on grantee shipments to the island. In
addition, State said that DRL, the Bureau of Western Hemisphere
Affairs, the Office of the Cuba Transition Coordinator, and USAID would
meet regularly to share information gathered in quarterly meetings with
grantees. USAID officials commented that including the Cuba program
office in interagency working groups and weekly staff meetings of
State's Cuba desk would improve operational coordination. Including the
Cuba program office in communications between USINT and grantees also
would benefit USAID grantee oversight and management.
U.S. Assistance Is Intended to Support the Development of Cuban Civil
Society:
USAID and State democracy assistance generally aims to support
independent civil society groups and individuals in Cuba. The 1992 and
1996 acts authorized support for individuals and independent NGOs in
Cuba, such as sending humanitarian assistance to victims of political
repression and their families; providing material and other support;
sending books and other information; and supporting visits and the
permanent deployment of independent human-rights monitors. The USAID
Cuba program's strategic objective is "to help build civil society in
Cuba by increasing the flow of accurate information on democracy, human
rights, and free enterprise to, from, and within Cuba." Table 3
summarizes the DRL, USINT, and USAID program activities for democracy
assistance targeted at Cuba.
Table 3: State and USAID Program Activities for Cuba Democracy
Assistance:
State:
DRL--Office for the Promotion of Human Rights and Democracy;
* Support human rights and democracy; increase the flow of information
on Cuba’s transition to a market-based economy and democracy.
* Support democracy-building by women.
* Support democracy and civil society organizations in the Afro-Cuban
community.
* Reach out to disaffected youth.
* Support NGO training to promote the peaceful transition to democracy.
* Provide communications and office equipment to civil society groups.
* Strengthen and expand independent libraries and promote solidarity
with international library associations.
* Promote independent labor organization membership and development;
facilitate international contacts.
USINT, Havana, Cuba;
* Maintain regular contact with civil society activists, including
independent journalists and librarians, human rights activists, wives
of political prisoners, and political activists.
* Broadly distribute books, magazines, newspapers, news clips, videos,
pamphlets, radios, and other equipment to Cubans willing to receive
them.
* Produce more printed material to reduce dependence on unpredictable
supply lines.
* Facilitate printing and distribution of information produced by civil
society.
* Provide Internet access and opportunities for long-distance
communications for Cuban civil society.
* Develop, support, and execute training and long-distance exchange
programs for members of Cuban civil society.
* Encourage international media and third-country diplomats to increase
their interaction with Cuban civil society and their reporting of human
rights and other issues.
* Facilitate interaction between members of Cuban civil society and
civil society organizations in the United States and elsewhere.
* Help improve Radio/TV Martí programming.
USAID.
Latin America and Caribbean Bureau--Cuba Program Office;
* Build solidarity with human rights activists by providing moral
support, information, and non-financial material assistance (including
laptop computers, printers, fax machines, short-wave radios and food
and medicine).
* Give voice to independent journalists by publishing their reports on
the internet for dissemination worldwide, providing the Cuban people
with hard copies of their reports, and providing training and (non-
financial) material assistance.
* Defend workers’ rights by alerting the international community to
Cuban government actions in violation of international standards
protecting labor rights.
* Help develop independent NGOs by providing them with information,
training, and (non-financial) material assistance.
* Provide direct outreach to the Cuban people by providing newsletters,
books, and other informational materials.
* Plan for transition by holding conferences and publishing studies
Source: GAO analysis of State and USAID records.
Note: DRL reorganized in June 2006. State's Cuba democracy assistance
program now falls under the new Office of Asia and Western Hemisphere.
[End of table]
USAID and State Made Awards to Three Types of Grantees:
In implementing their program objectives, State and USAID awarded 44
grants and cooperative agreements from 1996-2005[Footnote 21] to 34
grantees in three categories:
* Cuba-specific NGOs received awards totaling $37.3 million (about 51
percent of the total value of the awards);
* NGOs with a worldwide or regional focus received awards totaling
$28.7 million (about 39 percent of the total value of the awards); and:
* Universities received awards totaling about $7.6 million (about 10
percent of the total value of the awards).
All 34 grantees are U.S.-based, and most are located in Washington,
D.C., or Florida. Table 4 summarizes State and USAID awards from 1996-
2005.
Table 4: State and USAID Cuba Democracy Assistance Grantees and Awards,
1996-2005:
Type of organization: Cuba-specific NGO; USAID: No. or orgs: 12;
USAID: Awards: No.: 17;
USAID: Awards: Amt.: $37.3;
State: No. of orgs: -;
State: Awards: No.: -;
State: Awards: Amt.: -;
Total: No. of orgs.: 12;
Total: Awards: No.: 17;
Total: Awards: Amt.: $37.3.
Type of organization: Regional or worldwide NGO; USAID: No. or orgs:
12;
USAID: Awards: No.: 14;
USAID: Awards: Amt.: $20.5;
State: No. of orgs: 4;
State: Awards: No.: 4;
State: Awards: Amt.: $8.1;
Total: No. of orgs.: 14;
Total: Awards: No.: 18;
Total: Awards: Amt.: $28.7.
Type of organization: University;
USAID: No. or orgs: 8;
USAID: Awards: No.: 9;
USAID: Awards: Amt.: $7.6;
State: No. of orgs: -;
State: Awards: No.: -;
State: Awards: Amt.: -;
Total: No. of orgs.: 8;
Total: Awards: No.: 9;
Total: Awards: Amt.: $7.6.
Total;
USAID: No. or orgs: 32;
USAID: Awards: No.: 40;
USAID: Awards: Amt.: $65.4;
State: No. of orgs: 4;
State: Awards: No.: 4;
State: Awards: Amt.: $8.1;
Total: No. of orgs.: 34;
Total: Awards: No.: 44;
Total: Awards: Amt.: $73.6
Source: GAO analysis of State and USAID records.
Note: Total for number of organizations does not add because two
grantees received awards from both USAID and State.
[End of Table]
Some of the NGOs with a worldwide or regional focus have a relatively
long history working on Cuba issues. In some cases, these NGOs have
received grants from NED. From 1984-2005, NED awarded 158 grants
totaling $13.3 million for democracy assistance for Cuba. Established
by Congress in 1983,[Footnote 22] NED is a private nonprofit
corporation with the purpose of encouraging and supporting activities
that promote democracy around the world. As part of its global grants
program for "opening dictatorial systems," NED assistance to Cuba has
focused on providing aid to journalists, independent workers'
organizations, and cooperatives, while maintaining exile-based programs
that defend human rights, provide uncensored information, and encourage
dialog about a country's political future. NED's independent governing
board makes decisions about which assistance proposals the organization
funds. In 2005, using a $3 million grant from DRL, NED funded 16 Cuba-
related grants totaling about $2.2 million. (Four of the 16 grantees
also have active USAID grants for Cuba democracy assistance.)
Grantee Selection Was Based on Unsolicited Proposals until 2004:
Our analysis showed that about 95 percent ($61.9 million) of USAID's
total awards were made in response to unsolicited proposals. From 1996-
2004, USAID made 34 awards ($54.7 million) based on unsolicited
proposals. The unsolicited proposals were evaluated by the interagency
working group (see table 2). In 2004-2005, USAID made 5 awards ($3.5
million) based on two requests for applications (RFA). The proposals
received in response to these RFAs were evaluated and ranked by two
technical evaluation committees that included State and USAID
officials. In 2005, USAID also made an additional award to a previous
grantee for $7.2 million based on an unsolicited proposal. The USAID
Assistant Administrator for Latin America and the Caribbean authorized
the negotiation of awards for both unsolicited and solicited proposals.
All awards ultimately were approved by an agreement officer in USAID's
Office of Acquisition and Assistance.
In keeping with the Federal Grant and Cooperative Agreement
Act,[Footnote 23] USAID policy encourages competitive awards for grants
and cooperative agreements in most circumstances so that the agency can
identify and fund the best projects to achieve program
objectives.[Footnote 24] USAID's general policy is to award all grants
and cooperative agreements competitively, seeking applications from all
eligible and qualified entities. However, USAID policy permits funding
unsolicited proposals (without the benefit of competition) when certain
criteria are met. For example, an unsolicited proposal may be funded if
USAID did not solicit the proposal and it presents a unique or
innovative approach, fully supports U.S. development priorities, and
demonstrates a unique capacity for the applicant to carry out program
activities. In such cases, USAID guidance requires that officials
explain the circumstances that justify funding these
proposals.[Footnote 25] The USAID Cuba program director told us that
the interagency working group (see table 2) had opposed prior attempts
to employ a competitive process for selecting grantees.
USAID's successful use of competitive solicitations for some awards in
2004-2005 suggests that the Cuba program could have employed this
selection strategy for at least some prior awards. A total of 27 NGOs
responded to USAID's 2004 and 2005 RFAs. USAID's technical evaluation
committees found the proposals submitted by 12 of the 27 applicants
"within the competitive range" of the RFAs, and recommended awarding
cooperative agreements to 6 applicants and asking an additional 6 to
submit (revised) best and final proposals. Eight of the 12 applicants
had not received prior awards for U.S. democracy assistance for Cuba.
In technical comments on this report, USAID officials said that using a
competitive process will not always result in grantees different from
those that would be selected using a noncompetitive process.
All four State awards in 2005 ($8.1 million) were made competitively;
two of these awards ($4.5 million) were to USAID Cuba grantees.
Proposals received in response to State's RFA were reviewed and
evaluated by two technical committees (panels) that included officials
from State's Western Hemisphere Affairs, DRL bureaus, USINT; awards
were approved by the Assistant Secretary of State for Democracy, Human
Rights and Labor. As previously discussed, the USAID Cuba program
director received copies of the proposals for comment but did not
participate in the technical panels. In commenting on this report,
State officials said that DRL would continue to the greatest extent
possible to use a competitive process for Cuba grants. State officials
also said that DRL's standard practice is to solicit participation by
USAID and the appropriate regional bureau on all its evaluation panels,
and that they will ensure that this policy is followed on future Cuba
panels.
Agreements Often Modified to Increase Funding and Extend Completion
Dates:
Our analysis showed that USAID modified 28 of the 40 agreements awarded
between 1996 and 2005 to increase funding, extend program completion
dates, or both.[Footnote 26] In several cases, these modifications
substantially altered grantees' project objectives.[Footnote 27] These
modifications increased the aggregate value of these agreements nearly
eight-fold--from about $5.9 million to nearly $50.1 million--and
extended the program completion dates by an average of about 3 years.
Between November 1997 and May 2006, USAID had modified 12 agreements
that we reviewed in detail (see fig. 1). These modifications increased
the aggregate value of these agreements from about $4.8 million to
nearly $42.3 million and extended the program completion dates by an
average of about 4.6 years.
Figure 1: Modifications in Total Authorized Length and Amount for 12
USAID Cuba Democracy Assistance Agreements, November 1997 to May 2006:
[See PDF for image]
Source: GAO analysis of USAID award documents as of May 2006.
[End of figure]
USAID policy requires that some modifications and extensions be
justified, such as those that extend the life of the award and
simultaneously either increase the total estimated amount of the award
or change the program description. Officials must explain why the
benefits of continuing the assistance activity with the same grantee
exceed the benefits of a competitive process favored by law and agency
policy. USAID Cuba program officials stated that they modified existing
agreements (rather than initiating new ones) to prevent disruption of
assistance programs.[Footnote 28] Additionally, officials said that
they wanted to avoid the administrative burdens associated with
awarding new grants or cooperative agreements. However, USAID
procurement officials told us that, whether modifying an existing
agreement or making a new noncompetitive award to the same grantee, a
similar amount of work is required.[Footnote 29] These officials also
identified several advantages to closing out awards and making new
ones. Following established closeout procedures, for example, provides
additional assurance that grantee expenditures to date have been
appropriate, and end-of-project reports provide important information
about project accomplishments and failings to date. As discussed in a
following section, the Cuba program office has decided to require
grantees to submit interim evaluations when requesting significant
project modifications or extensions.
Grantees Provided Assistance and Information to Recipients Using
Several Methods; USINT Played Active Role:
USAID reports that its grantees have provided a wide range of democracy-
related assistance since the Cuba program's inception. In 2005, the 10
grantees that we reviewed delivered humanitarian and material
assistance, training, and information to Cuba. In addition, several of
these grantees worked to increase international awareness of the Cuban
regime's human rights record; others planned for a democratic
transition in Cuba. Recipients of U.S. humanitarian and material
assistance, training, and information included human rights activists,
political dissidents, independent librarians, journalists, and
political prisoners and their families. Grantees employed several
methods to deliver these items to the island. According to grantees and
U.S. officials, these methods involve different security, flexibility,
and cost considerations. Increasingly since 2000, USINT has distributed
some grantee-funded assistance directly. USINT also provides
information, electronic equipment, and other support to Cubans using
its own funding.
U.S. Democracy-Related Assistance Since 1996:
According to data provided by USAID, from 1996 to 2006 the Cuba program
provided the following assistance: 385,000 pounds of medicines, food,
and clothing; more than 23,000 shortwave radios; and millions of books,
newsletters, and other informational materials. In addition, USAID
reported that U.S. assistance supported journalism correspondence
courses for more than 200 Cubans, the publication of about 23,000
reports by independent Cuban journalists about conditions or events in
Cuba, and visits to Cuba by more than 200 international experts to help
train and develop independent NGOs.
Dissidents we interviewed in Cuba said that they appreciated the range
and types of U.S. democracy assistance, that this assistance was useful
in their work, and that this aid demonstrated the U.S. government's
commitment to democracy in Cuba. Dissidents said they appreciate the
moral support that U.S. assistance provides, and that this aid enhanced
their ability to continue their pro-democracy work.
Grantees Provided Four Types of Assistance in 2005:
In 2005, the 10 grantees we reviewed reported activities in four
categories: (1) providing humanitarian and material assistance and
training to independent civil society groups and individuals; (2)
disseminating uncensored information to, within, and from Cuba; (3)
increasing international criticism of the Cuban regime by highlighting
its human and workers' rights violations; and (4) planning for a future
transition to democracy by sponsoring conferences and publishing
studies. Our analysis of quarterly reports and other records show that
these grantees provided substantial assistance in 2005 (see table 5).
Table 5: Assistance to Individuals and Groups in Cuba in 2005:
Category: Humanitarian[A];
Reported assistance:
- About 115,000 pounds of food, medicine, clothing, and other
assistance;
- Unspecified amounts of other humanitarian aid, such as assistance for
hurricane victims; Description:
- Food included canned and dried goods such as soups, tuna, bouillon,
and powdered milk;
- Medicines included over-the-counter pain relief medication, antacids,
and vitamins;
- Clothing, which sometimes was donated or used, included blue jeans, T-
shirts, underwear, and sandals.
Category: Material[B];
Reported assistance:
- About 4,900 shortwave radios;
- About 27 DVD players;
- About 13 copier/printer/fax machines;
- Video recorders and cameras;
- Office supplies;
- About 200 flashlights.
Description:
- Shortwave radio kits were powered by rechargeable batteries, solar
cells, or other methods;
- Office supplies included notebooks, paper, printer cartridges,
pencils, and pens;
- Other items included video game players, key chains, and holiday post
cards.
Category: Training;
Reported assistance: Thirteen exchange visits to the United States; Six
training seminars in Cuba; Technical and other assistance, such as
computer and business training; Description:
- One grantee provided materials and training on documenting labor
rights abuses and filing claims to labor rights organizations, for
example;
- One grantee provided leadership and management training for
activists.
Category: Uncensored information;
Reported assistance:
- About 100,400 books, magazines, and other reading materials;
- About 1.1 million newsletters and pamphlets;
- About 11,600 DVDs and CDs;
- 13 Web sites (One grantee reported more than 4.4 million average
monthly hits by more than 390,000 users) (One grantee reported an
average of about 57,000 monthly hits by more than 11,500 users);
- Daily, weekly, and monthly e-mails containing news, research studies,
and other information[c];
- Regular communication by telephone, fax, Internet/e-mail and mail[d];
- Radio/TV programs and interviews, including for Radio Martí and Radio
República. Description:
- Books in Spanish included Como Llegó la Noche (How the Night
Arrived), by Huber Matos; La Fiesta del Chivo (The Feast of the Goat),
by Mario Vargas Llosa; El Poder de los Sin Poder (Power of the
Powerless), by Vaclav Havel; and children’s reading and coloring books;
- Grantees also published books on Cuba written by Cuban activists,
such as Vive Boitel (Boitel Lives), by Jorge Luis García Pérez; and
Ojos Abiertos (Eyes Open), a collection of literature, poetry, and art
by Cuban writers and artists participating in a literary contest;
- Topics included peaceful democratic activism, Cuban and U.S. society
and history, international politics, and transitions to a free market
economy. Dissidents and others in Cuba said that The Da Vinci Code and
Harry Potter titles currently are two favorites of adults and children;
- Magazines contained news and opinion articles written by Cuba- and
Miami-based activists;
- Newsletters and pamphlets summarized international and Cuba-specific
news, events in Cuba, and other issues;
- Grantees regularly updated Web sites with news and opinion pieces,
links, and other information;
- DVDs included recordings of Radio Martí, grantee-produced talk shows,
recordings of political prisoners’ trials, and American children’s
movies. CDs included recordings of Cuban-American music;
- Radio program content included music, news analysis and commentary,
and recorded call-in programs.
Source: GAO analysis of 10 grantees' quarterly reports submitted to
USAID and State, and other records.
[A] Quantities include humanitarian assistance reported in pounds. In
addition, some grantees reported the quantity or the value of items
sent--for example, one grantee reported shipping approximately $4,500
worth of humanitarian aid.
[B] Quantities of items as reported. In some cases, grantees did not
specify quantities of items sent to Cuba. For example, one grantee
reported that individuals delivered "modest amounts of equipment."
[C] Grantees' e-mail distribution lists ranged in size from about 1,500
subscribers in the United States, Cuba and other countries, to tens of
thousands of e-mail addresses in Cuba.
[D] One grantee reported an increase in Internet communication
following the opening of USINT's computer labs in Havana.
[End of table]
In technical comments on this report, USAID officials said that the
purpose for providing novels, video games, children's coloring books,
and some other items listed in table 5 is to attract Cubans to
independent libraries and other organizations so that they can review
other materials on democracy, free markets, and other subjects.
Eight grantees also reported conducting international outreach and
advocating for human and workers' rights causes in Cuba (either
directly or through subgrantees). Our analysis of quarterly reports
shows that these grantees were involved in organizing or participating
in the following types of activities in 2005:
* conferences and meetings held by groups such as the United Nations
Human Rights Commission in Geneva, Switzerland, and the Organization of
American States General Assembly, in Ft. Lauderdale, Florida;
* meetings with foreign government and political leaders to discuss
human and workers' rights in Cuba and possible support for activists;
* conferences and meetings of civil society groups;
* press conferences, news releases, and other events related to human
rights; and:
* mail, e-mail, and letters distributed to foreign government
officials.
One grantee was primarily focused on planning for a democratic
transition. This grantee reported that it commissioned academic
studies, compiled databases, and organized seminars in the United
States and a Latin American country. These resources were made
available in print and online.
Recipients of U.S. Assistance Included a Range of Cuban Civil Society
Groups:
Our analysis of quarterly reports and other records shows that the
recipients of U.S. assistance in 2005 included political prisoners and
their families, independent librarians, journalists, political parties,
labor organizations, other civil society groups and activists, and, to
a lesser extent, the general Cuban public (see table 6).
Table 6: Recipients of U.S. Democracy Assistance in Cuba in 2005:
Recipient: Political prisoners and their families; Reported
assistance:
* Six grantees sent humanitarian assistance and other support to
political prisoners and their families;
* The Cuban Commission for Human Rights and National Reconciliation
estimates there are about 300 political prisoners in Cuba, including
about 60 of the 75 activists and dissidents arrested during the 2003
crackdown.
Recipient: Independent libraries;
Reported assistance:
* Eight grantees supported independent libraries throughout Cuba;
* Libraries typically are located in activists’ homes, civic groups,
and religious community centers; they provide space for adults and
children to read, hold discussions, watch television and movies, play
games, draw and paint.
Recipient: Independent journalists; Reported assistance:
One grantee focused on providing assistance to independent journalists;
* Other grantees may provide assistance to independent journalists who
are also independent librarians or family members of political
prisoners;
* One grantee reported that an average of about 30 independent
journalists submit news and opinion articles and photos for publication
online or in print.
Recipient: Independent political parties; Reported assistance:
* Five grantees sent assistance to leaders of various political parties
in Cuba;
* Although the Cuban Communist Party is the only official political
party in Cuba, a number of unofficial, independent political parties
also exist.
Recipient: Independent labor organizations; Reported assistance:
* One grantee focused on supporting independent workers’ rights
organizations in Cuba. Three other grantees also reported supporting
these groups;
* The Cuban government permits only one legal labor organization, the
Confederation of Cuban Workers.
Recipient: Other independent civil society groups and activists;
Reported assistance:
* Five grantees sent materials and training to civic groups, religious
centers, Cuban writers’ and artists’ groups, human rights groups, and
other professional organizations.
Recipient: Cuban public;
* Five grantees sent information directly to the Cuban public via
Internet sites, e-mails, and radio broadcasts;
* Grantees generally did not estimate how much of the population
received assistance through redistribution via independent
organizations.
Source: GAO analysis of 10 grantees' quarterly reports submitted to
USAID and other records.
Note: Individuals may be a member of more than one group--for example,
the spouse of a political prisoner might also be an independent
librarian or journalist.
[End of table]
According to USINT officials, recipients sometimes give away or sell
books, magazines, newspapers, or other assistance. According to senior
USINT officials, these actions may have the unintended effect of
expanding the reach of U.S. assistance. Senior U.S. officials viewed
these losses due to confiscation or reselling as an unavoidable cost of
providing democracy assistance in Cuba's repressive political and
economic environment. However, in technical comments on this report,
USAID officials said that, despite potential benefits of expanding the
reach of US assistance, selling such assistance is not allowed under
USAID policy. USAID recently sent an e-mail to its grantees reminding
them that they are forbidden to sell or knowingly condone the selling
of humanitarian aid or other assistance by recipients.
Several Methods Used to Deliver U.S. Assistance:
The grantees in our sample reported using several methods to deliver
humanitarian aid and material assistance, training, and informational
materials to Cuba. Grantees and U.S. officials said that these methods
involved different security, flexibility, and cost considerations. For
example, the estimated cost of delivering humanitarian or material
assistance to the island ranged from about $4 to $20 per pound.
Some grantees have taken steps to reduce the risk of loss--due to theft
or confiscation by the Cuban government--of assistance shipped to Cuba.
Dissidents we interviewed in Havana said that the assistance they
received from USAID and State grantees (and other organizations) was
sometimes interrupted. In addition, USAID officials said that the Cuban
government closed some independent libraries and confiscated their
books and equipment in 2005.
We plan to issue a classified version of this report that would provide
additional information about the methods used to deliver U.S.
assistance to Cuba, steps taken to reduce losses of assistance shipped
to the island, and some of the recipients of U.S. assistance in Cuba.
USINT Delivers Some Grantee and Other Assistance:
USINT data shows that it delivers assistance and information to more
than 2,500 individuals and groups in Cuba. In 2005, for example, the
office distributed over 269,000 books, magazines, articles, pamphlets,
and other materials. According to U.S. officials, USINT's role
delivering democracy assistance has increased since 2000--as indicated
by the substantial increase in the volume.[Footnote 30] These officials
also said that further expanding the volume of items distributed would
require additional staff and resources.
The assistance delivered by USINT was funded by State and USAID
grantees as well as by USINT. According to U.S. officials, USINT
purchased materials, equipment, and information, including U.S.
national news and professional magazines, such as the Spanish-language
versions of Newsweek, The Economist, Art in America, The Atlantic,
Popular Mechanics, and Downbeat. In 2004, the office also purchased
equipment, materials, and an electronic subscription allowing it to
publish onsite 300 copies of El Nuevo Herald daily newspaper. USINT
also purchased and distributed radios, laptop computers, and DVD
players. Some of this material and information distributed by USINT is
redistributed by individuals and groups to other locations in Cuba.
During our fieldwork at USINT, we observed employees unload, sort, and
distribute shipments sent by USAID grantees and one U.S.-based NGO, as
well as items purchased by USINT. Shipments included materials for
independent librarians and journalists, artists, musicians, academics
and teachers, churches, and foreign diplomats. Some of these shipments
were addressed to specific individuals. USINT officials said that they
deliver information directly to some Cuban government officials. USINT
officials also distribute literature and equipment to Cubans visiting
the consular section for visas or other business.
As part of its public diplomacy efforts, USINT provides
videoconferencing capabilities and public Internet access to facilitate
the work of State and USAID grantees. For example, grantees use
Internet-based video conferencing for training sessions. We observed a
training session organized by one USAID grantee for approximately 20
independent journalists. In addition to the training, the participants
said that they had received other U.S. assistance, such as equipment,
supplies, and help in publishing their stories outside Cuba. USINT also
provides public access to about 20 computers with Internet access,
printers, and copiers. During our fieldwork, we observed that a number
of Cuban activists used these computers. The computers also appeared to
be popular with the Cuban public--reservations for using them were
booked for a month in advance, according to USINT employees managing
this equipment.
Additionally, as part of USINT's public diplomacy program, the public
affairs office also compiles and selects daily news clippings and
quotes to display on an electronic billboard news ticker located on
USINT's exterior. This billboard was installed in January 2006 to
display information for people passing the building, which is located
on a major Havana street and pedestrian walkway.
Monitoring and Oversight of Cuba Program Grants Did Not Provide
Adequate Assurance That Funds Were Used Properly:
USAID's internal controls over both the awarding of Cuba program grants
and the oversight of grantees do not provide adequate assurance that
the grant funds are being used properly or that grantees are in
compliance with applicable laws and regulations.[Footnote 31] The Guide
to Opportunities for Improving Grant Accountability states that
organizations that award grants need good internal control systems to
provide adequate assurance that funds are properly used and achieve
intended results.[Footnote 32] However, we found some weaknesses in
internal control in the preaward, award, implementation, and closeout
phases of Cuba-program grants management.[Footnote 33] The agency's
preaward reviews of grantees often were not completed prior to grant
awards, and USAID auditors did not adequately follow up to correct
deficiencies after grant awards. In addition, the standardized terms
and conditions of grants and cooperative agreements lacked the detail
necessary to support adequate accountability; specifically, the grants
and cooperative agreements did not include a requirement for an
acceptable internal control framework, nor did they contain provisions
for correcting deficiencies noted by preaward reviews. USAID's Cuba
program office also does not have adequate policies and procedures for
assessing grantee risks in order to put in place proper procedures to
reduce that risk. In addition, a lack of adequate oversight and
monitoring by USAID's program office allowed for questionable
expenditures by grantees to go undetected; moreover, grantee compliance
with cost-sharing provisions was not adequately addressed. The program
office also did not provide adequate training to grantees and does not
appear to routinely follow prescribed closeout processes. These
weaknesses in agency and program office internal control policies and
procedures contributed to internal control deficiencies we found at 3
of the 10 grantees we reviewed, leaving USAID's Cuban democracy program
at increased risk of fraud, waste, and abuse. We referred the problems
we identified at these 3 grantees to the USAID Office of Inspector
General.
USAID's Preaward Processes Were Inadequate:
USAID guidance requires grant officers to determine whether the
potential recipient possesses, or has the ability to obtain, the
necessary management competence in planning and carrying out assistance
programs, and whether it practices mutually agreed upon methods of
accountability.[Footnote 34]
As addressed in the Guide to Opportunities for Improving Grant
Accountability, an effective review performed before the award--which
includes a general review of the control environment and the control
activities in place--helps to detect and correct control weaknesses
that could contribute to potential fraud, waste, and abuse of grant
funds. The potential grantee can then correct these weaknesses before
USAID provides funding. During our site visits, we identified
fundamental internal control weaknesses at three grantees that might
have been mitigated if USAID had performed more timely preaward reviews
and performed the necessary follow-up on findings. (Table 7 lists some
examples of the internal control weaknesses we identified at these
three grantees.)
First, in four of the eight instances in which preaward reviews were
conducted, the reviews were completed after the awards were
made.[Footnote 35] According to USAID officials, these four reviews
were issued from 3-33 days after the award date primarily because of
staffing shortages. However, in technical comments on our report, USAID
officials said that the agreement officer received oral findings from
USAID or Defense Contract Audit Agency auditors before the final
report.
We also identified one preaward review conducted for USAID by the
Defense Contract Audit Agency that appears to have had limitations and
weaknesses in its implementation. This review, dated November 20, 2002,
concluded that one of the three grantees for which we identified
fundamental internal control weaknesses had an adequate accounting
system. However, during our site visit in 2006, this grantee could
provide only some paid invoices and bank statements for transactions
before February 2005. These records were insufficient for tracking and
reporting accumulated grantee expenditures or reconciling bank
accounts.
Second, USAID's follow-up on preaward reviews was insufficient to
provide assurance that deficiencies and weaknesses found during the
preaward reviews were adequately addressed. Five of the eight preaward
reviews we assessed made recommendations for correcting deficiencies in
the grantees' accounting systems that could adversely affect grantees'
ability to record, process, summarize, and report direct and indirect
costs. However, the corresponding grants and cooperative agreements did
not include specific provisions for correcting these
deficiencies.[Footnote 36] Moreover, although all eight reviews we
assessed recommended follow-up reviews, USAID did not conduct most of
them in a timely fashion. In one case, USAID did not conduct a follow-
up review until 3 years after such a review was recommended in an
initial review. In technical comments on this report, USAID officials
said that in the past there were some instances where resources for
preaward and follow-up reviews were not available, but that obtaining
funding for these reviews is generally a priority for USAID and the
Office of Acquisition and Assistance. USAID officials stated that the
Office of Acquisition and Assistance will work with the Cuba program
office to ensure information regarding grantee audits is communicated
to all appropriate staff in a timely manner and that if any subsequent
audits are necessary, adequate funding will be made available.
Grant Agreements Did Not Support Program Accountability:
We performed a detailed review of four cooperative agreements and one
grant agreement that USAID signed between 1997 and 2005 for democracy
assistance for Cuba.[Footnote 37] These agreements had a variety of
objectives, ranging from providing humanitarian assistance to
dissidents and their families to providing information about conditions
in Cuba to the Cuban public and the international community. In
general, however, the standardized language of the agreements did not
contain sufficient detail to address the unique objectives of each
grant, the grantee's internal controls, or the remediation of known
grantee deficiencies. This increases the risk that grantees will use
program funding, either unintentionally or intentionally, for purposes
that are not intended by the program and that program assets will not
be adequately safeguarded.
According to the Guide to Opportunities for Improving Grant
Accountability, the terms, conditions, and provisions in the award
agreement, if well designed, can render all parties more accountable
for the award. The terms and conditions in the USAID grants and
cooperative agreements we reviewed generally lacked the detail
necessary to provide adequate guidance to grantees. For instance,
although providing humanitarian assistance is a common objective, the
agreements provided insufficient detail for grantees to differentiate
between allowable and unallowable types of such assistance. In
addition, rather than providing guidance in the agreement document, the
agreements pointed to additional sources of rules and regulations,
including supporting legislation that the grantees might have
difficultly locating or implementing without additional guidance. For
example, the agreements do not contain details about acceptable cost-
sharing contributions, but instead direct grantees to the Code of
Federal Regulations. The grant agreements we reviewed also did not
include provisions requiring grantees to establish and maintain an
acceptable internal control system or, as previously discussed,
provisions for correcting deficiencies identified during preaward
reviews.
Cuba Program Office Inadequately Monitored and Oversaw Grant
Implementation:
Internal controls should be designed to provide for ongoing monitoring
in the course of normal operations. We identified several weaknesses in
the USAID Cuba program office's oversight and monitoring of grantees'
implementation of grants and cooperative agreements, including the lack
of policies and procedures for identifying at-risk grantees, formal
oversight of grant implementation, and a framework for monitoring cost
sharing. In addition, the program office provided inadequate training
to grantees. These weaknesses exist in a restrictive environment where
the Cuban government precludes Cuba program officers from directly
observing the use and outcomes of the assistance.
Policies and Procedures for Mitigating Risks at At-Risk Grantees Are
Inadequate:
The USAID Cuba program office does not have adequate policies and
procedures for assessing and managing the risks associated with
specific grantees. USAID Cuba program officials have not performed a
formal risk assessment of the grantees providing assistance to Cuba,
although they said that they consider recipients of larger awards to be
higher risk. Larger recipients often are subject to the Single Audit
Act[Footnote 38] and annual financial statement audits, and are
therefore subject to internal control and compliance testing. The
program director and program office staff said that they visit grantees
at least quarterly. However, one of the grantees we reviewed said that
USAID officials do not conduct formal financial oversight visits to
their office. Visits to large and small grantees were not formally
documented and were not based on structured oversight procedures. In
addition, the USAID program office also performed limited to no reviews
of the financial records for recipients, increasing the risk that they
would operate without effective controls. USAID Cuba program officials
said that if the applicant had a prior history of managing USAID or
U.S. government contracts or grants, USAID contacted the cognizant
USAID or other federal agency technical officer for information about
those awards. For applicants without a prior history of managing such
federal awards, the program office verifies that the applicant had
received 501(c)(3) status from the Internal Revenue Service
(IRS).[Footnote 39] USAID also conducts local inquiries to verify the
reputation and qualifications of the applicant.
USAID Does Not Effectively Monitor Grant Project Implementation:
USAID's Cuba program office does not have a formal grantee monitoring
and oversight process to help ensure accountability for grant funds. We
found key weaknesses in the oversight USAID did provide.
First, USAID lacked adequate documentation of the grantees'
implementation plans. Five agreements between USAID and grantees
specified that grantees were to submit implementation plans for
approval before initial disbursements. A USAID official said the plans
had been communicated orally or included in the grantees' initial
proposals. However, we found inadequate documentation in USAID's files
to support this. In addition, some grantees with whom we spoke lacked
an understanding of USAID's requirements for implementation plans. For
example, two grantees could not confirm the existence of implementation
plans for their respective grants.
Second, USAID did not require grantees to submit detailed, well-
supported quarterly reports and did not have a formal process for
reviewing those reports. Along with a narrative report, USAID requires
grantees to submit one-page quarterly financial reports (but not
supporting documentation) to validate underlying expenditures. Although
grantees provide summary amounts for expenditures and obligations, the
financial information required by USAID in the quarterly reporting
process is not sufficiently detailed to help the program office
identify potentially inappropriate expenditures. In addition, USAID
does not have a formal process for reviewing this reporting. The lack
of formal quarterly review procedures and documentation reduces USAID's
ability to identify and correct inappropriate expenditures by grantees.
In technical comments on this report, USAID officials said that the
Paperwork Reduction Act limits USAID's ability to require, as a general
rule, grantees to report information in addition to that required under
OMB circular A-110 and 22 CFR Part 226 without approval from OMB. USAID
officials said that they will consider pursuing OMB approval.
Third, USAID does not have a protocol for monitoring visits to grantees
and does not document the results of those visits. Our Standards for
Internal Control in the Federal Government addresses the need for
developing and implementing detailed procedures for grantee monitoring.
During our fieldwork, we accompanied USAID Cuba office staff on site
visits to several grantees. During this fieldwork, we observed that
USAID officials did not use a structured review process or coordinate
their reviews to prevent gaps or duplication of efforts. USAID
officials did not prepare trip reports or other written summaries of
their observations during these site visits.[Footnote 40] Some grantees
stated that program officials generally examined only a limited number
of invoices during their visits. One program office staff member said
that, during site visits, he typically spent about an hour interviewing
grantee representatives and reviewing records at each grantee.
USAID Cuba Office Lacks Framework for Monitoring Cost Sharing:
USAID's Cuba program office did not have a framework for overseeing
grantee compliance with cost-sharing requirements in their grants and
cooperative agreements and could not determine whether grantees were
complying with these requirements. Cost sharing, an important element
of the USAID-grant recipient relationship, is applied to certain
grantees on a case-by-case basis. If USAID includes a cost-sharing
provision in an agreement, the respective grantee must finance a
specified amount of activity costs using nonfederal funds. Some
agreements allow grantee contributions to include nonmonetary
contributions, such as services and property, in addition to cash
contributions.[Footnote 41]
Twelve of the 13 USAID agreements we reviewed contained cost-sharing
provisions, totaling about $7.6 million. In some cases, the grantee's
cost share was a significant portion of the total amount of assistance
authorized under the agreement. For example, one grantee's initial
share represented 56 percent of the total estimated program amount.
Moreover, as previously discussed, the cost-sharing provisions we
reviewed offered little guidance about the allowable sources of cost-
sharing funds or the methods for valuing non-monetary contributions
applied toward the cost share, instead directing grantees to the Code
of Federal Regulations.[Footnote 42]
Grantees are required to periodically report to USAID the amounts they
have spent as their portion of the cost sharing. However, based on a
review of grantee documentation and interviews with agency staff, we
determined that USAID does not systematically monitor grantee
compliance with cost-sharing requirements. For example, staff does not
use a work program or structured methodology to determine whether
grantees comply with cost-sharing provisions in their respective
agreements.
Two of the USAID grantees we reviewed reported that they complied with
USAID grant regulations by applying funds received under grants from
NED toward their required share of program costs. USAID grant
regulations at 22 CFR 226.23 require grantees to meet their cost-
sharing requirement with nonfederal resources. For the purpose of
complying with USAID grant regulations on cost-sharing requirements, it
is unclear whether funds received under grants from NED constitute
federal or nonfederal resources.[Footnote 43] USAID officials, after
consulting with State and NED officials, have determined that NED funds
provided from U.S. government sources cannot be used by NED grantees to
meet required cost-share contributions under USAID regulations. USAID
officials said that they will address the proper use of NED grant funds
provided from U.S. government sources in relation to existing and
future USAID grants.
USAID Does Not Provide Adequate Training to Grantees:
One important role for a grantor program office is the training and
guiding of program grantees, as discussed in the 2005 Guide to
Opportunities for Improving Grant Accountability. However, USAID does
not provide formal grant management training to help grantees
understand the regulations, policies, and procedures governing grant
funds.[Footnote 44] According to USAID officials, limited English
proficiency has created additional challenges for some of the smaller
grantees. The Cuba program director stated that he had wanted to
provide formal training to certain grantees, but was concerned about
the grantee reaction to creating training requirements for some, but
not all, grantees. In technical comments on this report, USAID
officials said that although grantees are responsible for understanding
and complying with grant provisions and federal laws and regulations,
USAID will consider providing Spanish language technical assistance to
grantees to build NGO capacity for financial management. USAID also is
pursuing providing grant and regulation information to grantees in
Spanish.
USAID Does Not Appear to Routinely Follow Prescribed Closeout
Processes:
Closeout processes can be used for identifying problems with grantee
financial management and program operations, accounting for any real
and personal property acquired with federal funds, making upward or
downward adjustments to the federal share of costs, and receiving
refunds for unobligated funds that the grantee is not authorized to
retain. USAID did not provide us with evidence that they routinely
performed closeout processes for some agreements.[Footnote 45]
Currently, USAID guidance states that if a U.S. grantee requires a
closeout audit, the Office of Acquisitions and Assistance must include
a closeout audit request in the next regularly scheduled audit of the
organization. In technical comments, USAID officials said that such
audit requests are no longer made because the agency uses a database
system to track whether grantees required to have closeout audits
receive one in accordance with agency policies and procedures. The
Office of Acquisitions and Assistance recognizes that the current
written policy regarding closeout procedures is outdated and is working
to update it.
USAID's Weaknesses Contributed to Deficiencies Observed at Three
Grantees:
During our limited reviews, we identified fundamental internal control
weaknesses at 3 of the 10 grantees that most likely would have been
identified had USAID followed up on weaknesses identified by preaward
reviews. In addition, the lack of adequate oversight and monitoring by
USAID's program office allowed for questionable expenditures by three
grantees to go undetected. Table 7 summarizes the internal control
weaknesses we observed at these grantees.
Table 7: Internal Control Standard Deficiencies Observed at Three
Grantees, March-April 2006:
Grantee A: Control environment;
* A poor “tone at the top” and attitude by grantee management toward
maintaining adequate financial and program records;
* Grantee management lacks knowledge that commingling funds was not
authorized under the program.
Grantee B: Control environment;
* Grantee management lacks understanding of the requirements in the
grant agreement.
Grantee C: Control environment;
* Grantee management lacks understanding of the requirements in the
grant agreement;
* Management indicated that they were selling some inventory items,
primarily books meant for distribution in the program, to raise
additional revenue.
Grantee A: Control activities:
* Significant commingling of funds between the Executive Director’s
personal bank account, the USAID grant account, and the private
donations account;
* Lack of bank reconciliations and adequate records to support
expenditures;
* Lack of documentation to determine compliance with cost-sharing
requirements detailed in grant agreement;
* Recording of time charges that do not appear to be logical or correct.
Grantee B: Control activities:
* Lack of accounting records to support expenditures. For example,
grantee could not produce expense reports or detailed listings of
expenses for periods prior to February 2005;
* Questionable travel expenses lack adequate documentation;
* Lack of documentation to determine compliance with cost-sharing
requirements detailed in grant agreement.
Grantee C: Control activities:
* Lack of accounting records to support expenditures. For example,
grantee couldn’t provide time reports to justify salary expenses for
some employees.
* Questionable expenses paid to family member of grantee manager;
* Hundreds of dollars in petty cash was observed at the grantee’s
office that was not controlled or properly secured.
Source: GAO analysis of USAID and grantee records.
[End of table]
The 3 grantees discussed in table 7 accounted for about 9 percent ($4.7
million) of the awards received by the 10 grantees we
reviewed.[Footnote 46] Two of the 3 grantees detailed above did not
maintain adequate records of the amount and type of assistance or
materials sent to Cuba, the methods and dates assistance was sent or
transmitted, or efforts to verify that assistance was received.
Additionally, these two grantees had not established systematic
procedures for gathering, documenting, and reporting this
information.[Footnote 47]
For these three grantees, we identified numerous questionable
transactions and expenditures that USAID officials likely would have
identified had they performed adequate oversight reviews. For example,
two grantees had inadequate support for checks written to key officials
of that organization. In addition, one of these two grantees could not
justify some purchases made with USAID funds, including a gas chainsaw,
computer gaming equipment and software (including Nintendo Gameboys and
Sony Playstations), a mountain bike, leather coats, cashmere sweaters,
crab meat, and Godiva chocolates. According to this grantee's proposal,
USAID funds were to be used to provide humanitarian assistance and
information to dissidents and their families. Subsequent to our
questions regarding these purchases, the grantee's executive director
wrote us that he intended to submit corrections to USAID for some of
these charges.
In conjunction with the USAID Assistant Administrator for Latin America
and the Caribbean and the Cuba program director, we referred the
problems we identified at the three grantees discussed in table 7 to
the USAID Office of Inspector General. An investigator said that the
Office of Inspector General was investigating these three grantees.
Based on our limited review, 7 of the 10 grantees appear to have
established systematic procedures for documenting, tracking, and
reporting on the use of grant funds. These 7 grantees accounted for
about 91 percent ($47.2 million) of the awards received by the 10
organizations that we reviewed (see footnote 44). The operating
procedures at some of these 7 grantees are likely the result of pre-
existing internal control operating characteristics (and do not reflect
USAID monitoring and oversight). These grantees also had detailed
records of their respective activities. For example, one grantee
maintained an inventory and signed receipts for humanitarian shipments
to Cuba, and dated, handwritten notes of telephone calls or other
communications to verify receipt of shipments. Another grantee
maintained detailed records of the methods used, quantities of printed
material transmitted, and copies of communications as evidence of
receipt.
Some Data Available about the Impact of U.S. Assistance:
Agencies and grantees face an operating environment in Cuba that
presents monitoring and evaluation challenges. USAID has conducted some
program evaluation, but has not routinely collected program outcome
information from its grantees. Instead, USAID and its grantees have
largely focused on measuring and reporting program activities. In 2005-
2006, however, USAID began to focus on collecting better information
about the results of U.S. democracy assistance.
Operating Environment Presents Monitoring and Evaluation Challenges:
The operating environment in Cuba poses a range of challenges to
monitoring and evaluating U.S.-funded democracy assistance. Challenges
include:
* The lack of USAID presence in Cuba and the inability of the USAID
staff to travel there, because the Cuban government actively opposes
U.S. democracy assistance.
* The lack of operational coordination and routine communication links
between State and USAID (as previously discussed).
* Grantee reluctance to share information with other grantees because
of concerns about potential Cuban government infiltration of grantee
operations.
* USAID and grantee concerns that sensitive agency records could be
disclosed in response to Freedom of Information Act requests (as
previously discussed).
* U.S. officials and grantees cited potential danger to dissidents and
activists in Cuba if sensitive information was released or disclosed.
The USAID Cuba program director said that in this environment, strict
cause and effect relationships between the USAID program and changes in
Cuban civil society are difficult to establish and document.[Footnote
48] Compared with activities in Cuba, off-island activities, such as
those at U.S. universities, are generally easier to carry out, monitor,
and evaluate, according to USAID officials. However, off-island
activities have a less-evident and slower impact on Cuban society and
politics.
USAID and Grantees Have Conducted Some Evaluations of Cuba Assistance:
USAID's Cuba program office and its grantees have conducted some
evaluations of U.S. assistance, but these studies have been limited in
number and scope. USAID officials also have informally interviewed
Cuban dissidents and émigrés about the receipt and effectiveness of
U.S. assistance, but they did not systematically document, compile, or
analyze the results of these interviews. Although USINT has assessed
some independent libraries in Cuba, USAID has not received its reports.
USAID and Grantee Evaluations of Cuba Assistance:
USAID and its grantees have conducted some evaluations of U.S.
democracy assistance for Cuba (see table 8). Generally, however, these
efforts have not reflected a systematic approach to program evaluation,
although some benefits resulted.
Table 8: Evaluations of USAID's Cuba Democracy Assistance, 1996-2005:
Evaluation/study: Grantee evaluation of independent NGOs; (2004-2005);
Evaluation author, purpose, and findings: One year after increased
repression in Cuba, a grantee conducted an evaluation of some
independent NGOs in Cuba at USAID’s request. The study methodology
included fieldwork in Cuba by subject matter experts and telephone
interviews and analysis. The study:
- identified challenges—such as an out-dated leadership structure and
“brain drain” caused by emigration;
- identified best practices and lessons learned; and:
- included several recommendations to improve program implementation.
Our comments and observations: USAID and grantee officials stated that
they benefited from this evaluation and that it provided otherwise
unavailable information.
Evaluation/study: External evaluation of USAID's Cuba program (2000);
Evaluation author, purpose, and findings: USAID contracted with
PricewaterhouseCoopers to assess the effectiveness of its program,
assess grantee compliance with the agreement terms and conditions, and
recommend program improvements; The study methodology included
reviewing grantee records and interviews with grantee representatives,
U.S. officials, academics, and other experts. The study did not include
fieldwork in Cuba; The study found USAID's administration of the Cuba
program to be generally satisfactory. For monitoring and evaluation,
the study noted, however, that baseline data and targets to measure
program performance were drawn from limited data sources and had
limited utility for monitoring and evaluating the activities of some
grantees; The study recommended increasing program staff, adopting a
research agenda to guide planning and inform program activities,
expanding grantee information sharing and cooperation, and improving
measurement of program performance; Our comments and observations:
USAID implemented some of the study's recommendations but did not
implement others, such as the recommendation to improve program
performance (results) measures.[A].
Evaluation/study: Survey of recent Cuban emigrants (1999); Evaluation
author, purpose, and findings: Survey of recent Cuban emigrants to
establish a baseline on knowledge, attitudes, and access to accurate
information about democracy, human rights, and free enterprise; Our
comments and observations: The Cuba program plans to fund a follow-up
survey to measure changes in knowledge, attitudes, and access to
information since the 1999 survey.
Evaluation/study: Focus groups with Cuban émigrés (2003-2006);
Evaluation author, purpose, and findings: Two grantees conducted focus
groups with recent Cuban émigrés to estimate the audience for, and
improve the content and effectiveness of, a pro-democracy newsletter
published and distributed in Cuba by one of the grantees; The grantees
documented, compiled, and analyzed the results of these groups; Our
comments and observations: The USAID Cuba program director has
participated in some of these groups and has reviewed some of the
resulting analyses.
Evaluation/study: Grantee end-of-project reports (various years);
Evaluation author, purpose, and findings: USAID grants and cooperative
agreements require grantees to submit final reports containing an
evaluation of the program's accomplishments and failings, including
comments and recommendations for potential future work; Our comments
and observations: In our review of USAID files maintained for each
grantee, we found few end-of-project reports; Because agreements did
not require intermediate program evaluations, USAID's frequent use of
agreement extensions has allowed many projects to continue for several
years without evaluation.[B].
Source: GAO analysis of USAID and grantee records.
[A] In technical comments on this report, USAID officials said that,
following the evaluation, the Cuba program relied on an annual census
of the Cuban opposition's on-island actions as a proxy indicator for
assessing the performance of USAID programs to help develop civil
society in Cuba (see our discussion of this measure below).
[B] In technical comments on this report, USAID officials said that
grantee proposals requesting additional funding include lessons learned
and other information normally found in an end-of-project report. The
interagency committee reviewing the proposals uses this and other
information to evaluate grantee performance.
[End of table]
USAID's Informal Interviews with Cuban Dissidents:
The USAID program director also has conducted a number of informal
interviews with Cuban dissidents and members of independent Cuban NGOs
able to travel outside Cuba. Although limited by Cuban government
controls on travel, these opportunities provided USAID with some
ability to verify the receipt and impact of grantee assistance
directly, according to USAID officials. For example, the program
director was able to verify that some dissidents had received, and
continued to use, computers shipped to the island. In other cases,
USAID has relied on USINT reporting to verify receipt of such
assistance. However, these interviews and discussions were conducted on
a sporadic basis, and USAID officials did not systematically document,
compile, or analyze the results.
USINT Assessments of Independent NGOs in Cuba:
USINT officials have done some monitoring of assistance (books,
equipment, and supplies) distributed to about 100 independent NGOs in
Havana. (USINT employees distributed this assistance, which it and
USAID grantees had purchased.) As we observed during our fieldwork,
USINT employees kept records of unannounced inspection visits to these
organizations and submitted summary reports to USINT officials. Based
on these reports, USINT officials have recommended increases or
decreases in the level and type of assistance provided to these NGOs.
Although there have been documented losses at some of these
organizations, USINT officials said such losses were unavoidable in
Cuba and that their policy is to continue providing some limited
assistance to these NGOs. As discussed previously, however, USAID has
not received these reports.
USAID and Grantees Have Focused on Measuring and Reporting Program
Activities:
USAID and its grantees have not routinely collected and reported data
and other information about the results or impact of the democracy
assistance they have provided. USAID's reports have focused primarily
on measures of program activities. The Cuba program office's
accomplishment reports, updated on a monthly basis, consolidate
quantitative data about activities and related information submitted
quarterly by grantees, such as the number of books, newsletters, and
other informational materials sent to the island; the number of reports
published by Cuban independent journalists; and instances where the
international community denounced Cuban government human rights
violations. The Cuba program's annual operational plan takes a similar
approach. USAID officials said that data about shipments of books,
newsletters, and other informational materials provide a measure of the
flow of information to Cuba. The officials also said that data about
the number of independent journalists published outside Cuba on the
Internet (or in hard copy) provide a measure of the flow of information
from Cuba. However, these reports and data do not provide an assessment
of the impact or contribution of these activities in the context of
helping to build civil society in Cuba (part of the USAID Cuba
program's strategic objective) or the effectiveness of U.S. assistance
in achieving broader U.S. democracy goals and objectives for
Cuba.[Footnote 49]
In addition to measures of program activities, USAID officials point to
the total number of nonviolent acts of civil resistance in Cuba, as
reported in annual Steps to Freedom reports,[Footnote 50] as a proxy
indicator for measuring the positive impact of U.S. democracy
assistance. Rich in detail about Cuba's dissidents, the reports show
that total nonviolent acts of civil resistance increased from about 600
acts in 2001 to about 1,800 in 2004. However, the reports show that,
between 2002 and 2004, the number of less intense nonviolent acts of
civil resistance increased while the number of more intense acts
declined.[Footnote 51] In commenting on a draft of our report, State
officials said that this decline coincided with the Cuban government's
2003 crackdown on dissidents. Annual reports on human rights conditions
in Cuba prepared by Amnesty International, Human Rights Watch, and
State covering the same period (2001-2004) portray a more complex and
ambiguous human rights situation than the generally positive trend
shown by the indicator in the Steps to Freedom reports.
Grantees' quarterly reports to USAID are the main vehicle for reporting
performance information. The quarterly reports submitted by 10 grantees
in 2005 consistently provided data about program activities. However,
these reports generally did not provide a focused analysis of program
accomplishments. Only two organizations consistently identified program
results as part of their quarterly reporting. For example, one
grantee's reports discussed the results of assistance activities in the
context of the broader Cuban pro-democracy movement and short-and long-
term civil society goals. USAID officials said that they had repeatedly
emphasized to grantees the importance of including information about
project results in their reporting. The USAID Assistant Administrator
for Latin America and the Caribbean and the Cuba program director said
that the director had discussed this topic at grantee meetings held
several times each year.
USAID Program Office Has Started to Focus on Collecting Better
Information:
Since 2005, USAID's Cuba program has taken several steps to improve
data collection and its communication with grantees. These include:
* Increasing staff expertise and meeting more regularly with grantees.
In 2005, a staff member with experience in grant management and
performance evaluation joined USAID's Cuba office; this staff member
developed, and began using, a set of structured questions to gather and
record grantee performance information. This new staff member also
began to meet and regularly communicate with grantees. However, the
staff member said that the office's small number of staff makes
effective program monitoring and evaluation challenging.[Footnote 52]
* Improving information in grantees' quarterly reports. The Cuba
program acknowledged that quarterly reports submitted by grantees have
not included important information about program activities and
results. Several grantees said that they were unsure of what evaluation-
related information to include in reports and had received relatively
little guidance from USAID until recently. According to USAID, smaller
grantees have experienced greater challenges in this regard because of
their lack of experience working with USAID and because of their
limited English proficiency. USAID officials acknowledged grantees had
not been provided formal training in program evaluation.
In July 2006, USAID's Cuba program office e-mailed grantees a more
detailed description of the types of data and other information to
include in their quarterly reports, as part of a series of e-mails to
remind grantees of USAID laws, regulations, and policies. USAID staff
said that they are working with grantees to improve the quality of
their quarterly reports and that they intend to issue additional
written guidance.
* Requiring intermediate program evaluations. In 2006, recognizing that
the frequent use of agreement modifications and extensions had
postponed end-of-project evaluations for many grantees, the Cuba
program office decided to include terms in future grants and
cooperative agreements requiring grantees to submit interim evaluations
when requesting significant project modifications or extensions.
Conclusions:
In the context of recent recommendations to increase funding for
democracy assistance in Cuba, we conclude that the U.S. government's
efforts to support democratic political change face several significant
challenges. Some of these challenges stem from the difficult operating
environment in Cuba, while others are the result of weaknesses in the
managerial oversight the program has received to date. Recently,
however, USAID has taken some steps to establish improved policies and
reporting procedures.
Effectively delivering democracy-related assistance to Cuba will
require a number of improvements, including better communication
between State and USAID regarding day-to-day activities, particularly
in Cuba. In addition, a number of the basic elements required for
effective grant management and oversight need to be strengthened. These
include ensuring that effective preaward reviews are performed,
strengthening internal controls at the grantee level, and identifying
and monitoring at-risk grantees. Further, agency officials need to
inform and, as needed, train grantees about their shared
responsibilities in collecting information that will permit better
monitoring and evaluation of program outcomes. Ultimately, better
program oversight can help to assure that resources are responsibly and
effectively utilized and grantees are in compliance with applicable
laws and regulations.
Recommendations for Executive Action:
We recommend that the Secretary of State and the USAID Administrator
work jointly to improve communication among State bureaus in
Washington, D.C; USINT in Cuba; and USAID offices responsible for
implementing U.S. democracy assistance, recognizing that USINT has
limited resources but a crucial role in providing and monitoring
democracy assistance.
We also recommend that the USAID Administrator direct the appropriate
bureaus and offices to improve management of grants related to Cuba by
taking the following actions:
* Improving the timeliness of preaward reviews to ensure they are
completed prior to the awarding of funds.
* Improving the timeliness and scope of follow-up procedures to assist
in tracking and resolving issues identified during the preaward
reviews.
* Requiring that grantees establish and maintain adequate internal
control frameworks, including developing approved implementation plans
for the grants.
* Providing grantees specific guidance on permitted types of
humanitarian assistance and cost-sharing, and ensuring that USAID staff
monitors grantee expenditures for these items.
* Developing and implementing a formal and structured approach to
conducting site visits and other grant monitoring activities, and
utilizing these activities to provide grantees with guidance and
monitoring.
Agency Comments and Our Evaluation:
We received comments from State and USAID, which are reprinted in
appendixes II and III, respectively. State and USAID appreciated the
professionalism with which we conducted our review and were gratified
that we were able to report that dissidents in Cuba appreciated U.S.
democracy assistance, and found this assistance to be useful in their
work. In response to our recommendation, State said that, consistent
with the Secretary of State's recent foreign assistance reforms, it was
taking steps to improve interagency communication and coordination for
Cuba democracy assistance. These steps included providing USAID
officials regular access to classified communications with USINT in
Havana and State, and implementing regular meetings between DRL, the
Bureau of Western Hemisphere Affairs' Office of Cuban Affairs, the
Office of the Cuba Transition Coordinator, and USAID. State also
commented that--within the constraints imposed by implementing a
democracy-building program in Cuba--DRL and the Office of Cuban Affairs
would work closely with all grantees to identify creative ways to
document the impact of Cuba programs. These new methods of
documentation would attempt to measure impact beyond direct outputs
(e.g., items delivered or persons trained).
USAID said it was taking actions to improve its performance in
managing, monitoring, and evaluating democracy assistance for Cuba.
These actions would include better documentation of USAID grantee
monitoring, improved interagency communications, and a review of all
aspects of the USAID procurement system as it relates to the Cuba
program. Subsequent to submitting its written comments, USAID offered
additional comments regarding our recommendations. USAID concurred with
our first, second, third, and fifth recommendations, as well as with
the part of our fourth recommendation that USAID should ensure that its
staff monitors grantee expenditures. USAID concurred, in part, with our
recommendation to provide grantees specific guidance on permitted types
of humanitarian assistance and cost-sharing. To avoid potentially
making grant documents unwieldy and difficult to use, USAID plans to
continue to reference additional regulatory material regarding
allowable costs and other matters in its grants. However, USAID will
review its standard grant provisions to ensure that grantees are
provided clear guidance regarding how to access referenced regulatory
materials. USAID also is considering providing technical assistance for
grants management and grant and regulatory documents to Cuba program
grantees in Spanish.
State and USAID provided technical comments on a draft of this report,
which we have incorporated where appropriate. In its technical
comments, USAID raised some issues regarding some of our findings.
However, we have worked with agency officials to resolve or clarify
these matters.
We will send copies of this report to the Secretary of State, the USAID
Administrator, appropriate congressional committees, and other
interested parties. Copies will be made available to others upon
request. In addition, this report will be made available at no charge
on the GAO Web site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact David Gootnick at (202) 512-4128 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.
Signed by:
David Gootnick, Director:
International Affairs and Trade:
Signed by:
Jeanette M. Franzel, Director:
Financial Management and Assurance:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
This report examines (1) the roles and objectives of the agencies
implementing U.S. democracy assistance targeted at Cuba and the
characteristics and selection of the grantees[Footnote 53] receiving
Department of State (State) and U.S. Agency for International
Development (USAID) awards; (2) the types, amounts, beneficiaries, and
methods used to deliver assistance for selected grantees in
2005;[Footnote 54] (3) USAID's monitoring and oversight of these
grantees; and (4) the availability of data to evaluate whether U.S.
assistance has achieved its goals.
During our review, we conducted fieldwork at USAID, State, and the
Departments of Treasury (Treasury) and Commerce (Commerce) in
Washington, D.C; we also conducted work at the offices of selected
grantees in Washington, D.C., and Miami, Florida. At these locations,
we analyzed key records and interviewed agency officials and grantees
to obtain an understanding of the processes used to select grantees,
monitor their performance, assess the disbursement of funds, and
evaluate project results. We also discussed Cuba democracy assistance
with officials at the National Endowment for Democracy and the Council
on Foreign Relations in Washington, D.C.
We conducted fieldwork at the U.S. Interests Section (USINT) in Havana,
Cuba, from late June-early July 2006, where we interviewed relevant
U.S. government officials and observed their activities, such as
sorting, delivering, and monitoring assistance. We interviewed several
leading dissidents and human rights activists--including independent
librarians and journalists--and family members of political prisoners.
We also interviewed foreign-embassy officials.
We conducted our work from August 2005 through September 2006 in
accordance with generally accepted government auditing standards.
To identify the roles and objectives of the implementing agencies, we
analyzed (1) U.S. laws authorizing democracy assistance to Cuba and
related records, such as agency officials' statements and committee
reports; (2) State and USAID policy and strategy records, such as
agency strategic and performance plans, budget requests, and bureau and
mission performance plans; and (3) the two reports of the Commission
for Assistance to a Free Cuba and related records. We also interviewed
USAID, Treasury, Commerce, and State officials (including State's Cuba
Transition Coordinator) about the objectives and roles of their
agencies in providing assistance to Cuba.
To examine the characteristics and selection of the grantees that
received State or USAID awards in 1996-2005, we reviewed key grantee
and agency records including annual reports, proposals, and Web sites
for the 34 organizations that received State or USAID awards during
that period; and the grants and cooperative agreements, agreement
modifications, and related agency records for the 44 awards State and
USAID made during that period. We analyzed this information to
determine (1) the types and location of organizations that received
awards; (2) whether these organizations had previously worked on
democracy promotion activities; (3) the methods State and USAID used to
identify and evaluate assistance proposals; and (4) selected
characteristics of the awards, such as their initial amount and length,
cost-sharing requirements, and any postaward modifications.
To identify the types and amounts of assistance provided by grantees,
beneficiaries of this assistance, and grantees' delivery methods, we
selected a judgmental sample of 10 grantees with active awards in 2005
(see table 9). These 10 grantees were implementing 14 grants or
cooperative agreements in 2005[Footnote 55] with a total estimated
budget of nearly $52 million. In selecting the grantees, we considered
a range of factors to ensure our sample included a mix of large,
medium, and small awards; included a mix of types of nongovernmental
organizations (NGO); and covered the range of U.S. democracy assistance
targeted at Cuba. We focused our detailed analysis on USAID's grantees
and agreements because State's grants were not awarded until mid-2005.
We also considered the length of time grantees had been providing U.S.
democracy assistance for Cuba to ensure grantees had several years
experience working with USAID.[Footnote 56] The resulting sample
accounts for over 76 percent of the State and USAID awards active in
2005 for U.S. democracy assistance targeted at Cuba.
Table 9: State and USAID Grantees and Awards that GAO Reviewed:
Grantee: Grantee 1;
Location: Washington, DC;
Grants and cooperative agreements: Number of awards: 2; Grants and
cooperative agreements: Dollars (in millions)[A]: $12.28.
Grantee: Grantee 2;
Location: Miami, FL;
Grants and cooperative agreements: Number of awards: 1; Grants and
cooperative agreements: Dollars (in millions)[A]: 10.95.
Grantee: Grantee 3;
Location: Washington, DC;
Grants and cooperative agreements: Number of awards: 2[B]; Grants and
cooperative agreements: Dollars (in millions)[A]: 10.09.
Grantee: Grantee 4;
Location: Miami, FL;
Grants and cooperative agreements: Number of awards: 1; Grants and
cooperative agreements: Dollars (in millions)[A]: 4.94.
Grantee: Grantee 5;
Location: Washington, DC;
Grants and cooperative agreements: Number of awards: 2; Grants and
cooperative agreements: Dollars (in millions)[A]: 4.67.
Grantee: Grantee 6;
Location: Miami, FL;
Grants and cooperative agreements: Number of awards: 1; Grants and
cooperative agreements: Dollars (in millions)[A]: 3.05.
Grantee: Grantee 7;
Location: Miami, FL;
Grants and cooperative agreements: Number of awards: 1; Grants and
cooperative agreements: Dollars (in millions)[A]: 2.32.
Grantee: Grantee 8;
Location: Miami, FL;
Grants and cooperative agreements: Number of awards: 1; Grants and
cooperative agreements: Dollars (in millions)[A]: 2.02.
Grantee: Grantee 9;
Location: Miami, FL;
Grants and cooperative agreements: Number of awards: 2; Grants and
cooperative agreements: Dollars (in millions)[A]: 1.21.
Grantee: Grantee 10;
Location: Miami, FL;
Grants and cooperative agreements: Number of awards: 1; Grants and
cooperative agreements: Dollars (in millions)[A]: 0.36.
Grantee: Total;
Grants and cooperative agreements: Number of awards: 14; Grants and
cooperative agreements: Dollars (in millions)[A]: $51.89.
Source: GAO analysis of State and USAID records. These grants and
cooperative agreements were active in fiscal year 2005.
[A] Reflects agreement modifications as of 2005.
[B] Grantee had one State and one USAID grant.
[End of table]
To identify these organizations' program objectives, we analyzed
grantee proposals, grants or cooperative agreements, internal
authorization memorandums, and modification of assistance forms. We
obtained grantees' quarterly narrative and financial reports to USAID
to identify grantees' reported activities and to quantify the types and
amounts of assistance these grantees reported sending to Cuba. To
corroborate these data and to develop an understanding of grantees'
delivery methods, we interviewed representatives of these organizations
in Washington, D.C., and Miami and, when possible, observed their
activities. We also reviewed internal documents provided by these
grantees, including procedures manuals, tracking databases and reports,
and other records.
We developed an electronic database to track and analyze selected terms
of the agreements in our sample, including objectives, award amounts
and dates, cost-sharing amounts, modifications, sub-grant agreements,
and reported activities. To test the general reliability of quantities
of assistance recorded for our sample, we compared these data with
other documents provided by grantees (e.g., shipment logs, tracking
databases, and internal reports), documents submitted by USAID, and
data provided by USINT. We also used interviews with grantee
representatives to corroborate these data. Based on these general
comparisons, we determined grantees' records were sufficiently reliable
for the purposes of this report.
To identify the types and amounts of assistance provided by grantees in
our sample, we used our electronic database to track and summarize
grantees' individual activities, which we then used to categorize
assistance types and amounts. In addition, we interviewed
representatives of the grantees in our sample and select beneficiaries
in Havana about their experiences.
To assess USAID's management and internal control for monitoring
grantees, we reviewed grants and cooperative agreements, interviewed
agency officials and select grantees, reviewed USAID and grantee
policies and procedure manuals, performed walk-throughs of grantee
disbursement processes, and reviewed grantee invoices and supporting
documentation. For 10 grantees, we reviewed the internal controls and
related residual fiscal accountability risk. Based on our initial
reviews, we performed additional expenditure testing for 3 grantees
that appeared to have poor control environments. To assess grantees'
potential fiscal accountability residual risk, we reviewed the adequacy
of their internal controls according to the criteria contained in our
Standards for Internal Control in the Federal Government.[Footnote 57]
Our procedures did not specifically address whether grantees were
complying with federal laws and regulations. However, grantees
expending more than $500,000 in federal funds annually are subject to
the Single Audit Act. Under this act, these grantees must receive an
annual audit, which includes determining whether the grantee has
complied with laws, regulations, and the provisions of contracts or
grant agreements that may have a direct and material effect on each of
its major programs. We focused our detailed analysis on USAID's grant
oversight and did not perform similar detailed analysis of State's
grant oversight because State's grants were not awarded until mid-2005.
We performed a detailed review of 5 of 14 grant agreements in our
sample. We selected these agreements because they represented the range
of Cuba program objectives outlined and were signed over an 8-year
period between 1997 and 2005. A USAID official confirmed that all grant
and cooperative agreements use standard language from document-
generating software. The standard language is modified periodically
under the direction of the USAID's Office of Acquisition and
Assistance.
To assess the monitoring and reporting of program performance
information evaluation, we examined USAID, Office of Management and
Budget, and other federal government policies and guidance. We also
reviewed our previous reports and expert panel reports on grant
accountability to identify lessons learned. To better understand the
challenges of evaluating democracy assistance, we reviewed relevant
literature. We also analyzed USAID Cuba program documents, grantee
agreements, and modifications to identify guidance provided on
reporting performance data. We also analyzed grantee quarterly reports
to identify how they reported program achievements. We also assessed
evaluations of U.S. assistance to Cuba, such as one grantee's
evaluation of some independent NGOs, the PricewaterhouseCoopers
evaluation of the USAID Cuba program, and associated program documents.
We interviewed USAID Cuba program officials concerning their current
and past program evaluation practices; program grantees in Miami and
Washington, D.C., to identify the instructions and feedback they have
received concerning program reporting and evaluation; USINT officials
concerning their role in monitoring and reporting program performance
information; and beneficiaries in Cuba about their views of the
effectiveness of the U.S. democracy assistance they had received. We
focused our detailed analysis on USAID's program effectiveness because
State's grants were not awarded until mid-2005.
Both State and USAID officials provided sensitivity reviews of a draft
of this report, and we followed their direction in removing potentially
sensitive or classified information.
[End of section]
Appendix II: Comments from the Department of State:
United States Department of State:
Assistant Secretary for Resource Management and Chief Financial
Officer:
Washington, D.C. 20520:
September 20 2006:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.:
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "Foreign
Assistance: Better Management and Oversight Needed for U.S. Democracy
Assistance Efforts in Cuba," GAO Job Code 320373.
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 John
Regan, Economic Officer, Bureau of Western Hemisphere Affairs, at (202)
647-9389.
Sincerely,
Signed by: Bradford R. Higgins:
cc: GAO - Elizabeth Guran:
WHA - Elizabeth Whitaker:
State/OIG - Mark Duda:
Department of State Comments on GAO Draft Report:
Foreign Assistance: Better Management and Oversight Needed for U.S.
Democracy Assistance Efforts in Cuba (GAO-06-1066N). (GAO Code:
320373):
Thank you for allowing the Department of State the opportunity to
comment on the draft report Foreign Assistance: Better Management and
Oversight Needed for U.S. Democracy Assistance Efforts in Cuba.
The Department of State 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 of State is pleased that GAO auditors secured the
necessary Cuban government visas to spend ten days in Havana meeting
with some of Cuba's human rights activists, independent librarians,
independent journalists, and other citizens of Cuba who struggle daily
against one of the world's most repressive political and economic
systems.
The Department of State is gratified that GAO was able to report that
"recipients we interviewed in Cuba said they appreciated the range and
types of U.S. democracy assistance, that this assistance was useful in
their work, and that this aid demonstrated the U.S. Government's
commitment to democracy in Cuba."
The Department of State's Bureau of Democracy, Human Rights and Labor's
("DRL") standard practice is to compete openly its Human Rights and
Democracy Funds ("HRDF") grants and to meet regularly with its grantee
organizations. DRL will continue this practice to the greatest extent
possible with its Cuba programs. DRL's standard practice also is to
solicit participation by USAID and the relevant regional bureau on all
of its HRDF panels. DRL will ensure that this policy is followed on all
HRDF Cuba panels.
The GAO report recommends greater communication and coordination
between State and USAID on their respective programs, a process which
has already begun. Consistent with the foreign assistance reforms
recently launched by the Secretary through the Office of the Director
of Foreign Assistance, all foreign assistance operational planning will
be country based and will be integrated and coordinated among the
implementing agencies. Country operational planning will include a
careful analysis of the appropriateness and efficacy of proposed
implementing partners. In addition, DRL, The Bureau of Western
Hemisphere Affairs' Office of Cuban Affairs, the Office of the Cuba
Transition Coordinator, and USAID will meet on a regular basis to share
information gathered in quarterly grantee meetings. As part of our
effort to improve communications, USAID Cuba program officials now
having regular access to classified communications with the U.S.
Interests Section in Havana and counterparts at the Department of
State.
DRL's Cuba programs are relatively new. The implementation of democracy-
building programs in countries run by closed and repressive regimes
requires particular care to safeguard the security and privacy of
information of grantees. Within these constraints, DRL and the Office
of Cuban Affairs will work closely with all grantees to look for
creative ways to document the impact of Cuba programs that measure
impact beyond outputs such as items delivered or persons trained.
[End of section]
Appendix III: Comments from the U.S. Agency for International
Development:
USAID:
From The American People:
U.S. Agency for International Development: 1300 Pennsylvania Avenue,
NW:
Washington, DC 20523:
[hyperlink,http://www.usadgov]:
September 15, 2006:
David Gootnick:
Director:
International Affairs and Trade:
U.S. Government Accountability Office: 441 G Street, NW:
Washington, D.C. 20548:
Dear Mr. Gootnick:
I am pleased to provide the U.S. Agency for International Development's
(USAID) formal response on the draft GAO report Foreign Assistance:
Better Management and Oversight Needed for U.S. Democracy Assistance
Efforts in Cuba (GAO-06-1066N). (August 2006):
USAID appreciates the courtesy with which GAO conducted program audit
meetings, data collection and analysis over the past year and GAO's
stated willingness to incorporate USAID technical comments into the
final GAO report. We are pleased that GAO auditors received Cuban
government visas to spend ten days in Havana, with the opportunity to
meet with some of Cuba's human rights activists, independent
librarians, independent journalists, and other citizens of Cuba who
struggle daily against one of the most brutally repressive political
and economic systems in the world.
USAID is gratified that GAO was able to report that "recipients we
interviewed in Cuba said they appreciated the range and types of U.S.
democracy assistance, that this assistance was useful in their work,
and that this aid demonstrated the U.S. government's commitment to
democracy in Cuba." USAID partner organizations have clearly
contributed much, if not most, of this assistance. USAID believes their
efforts deserve continued support.
While USAID is taking issue with some findings in the draft report, we
will seek to improve agency performance in managing, monitoring, and
evaluating this assistance. The GAO has indicated several areas for
improvement, and USAID has immediately undertaken actions to address
them. These include more formal documentation of USAID monitoring
systems, improved communication mechanisms within the inter-agency
system, and a review of all aspects of the USAID procurement system as
it relates to the Cuba program. USAID will, of course, remain in close
contact with GAO as it moves to close out all GAO recommendations.
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.
Sincerely,
Signed by:
Lisa Fiely:
Chief Financial Officer:
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
David Gootnick, (202) 512-3149 or gootnickd@gao.gov: Jeanette M.
Franzel, (202) 512-9471 or franzelj@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Phillip Herr, Michael
Rohrback, Bonnie Derby, Elizabeth Guran, Keith H. Kronin, Todd M.
Anderson, Cara Bauer, Lynn Cothern, and Reid Lowe made key
contributions to this report. Ernie Jackson, Lauren S. Fassler, and
Arthur L. James, Jr., provided technical assistance.
[End of section]
Footnotes:
[1] Pub. L. No. 102-484, Div. A, Tit. XVII, Sec. 1705, 22 USC 6004.
[2] Pub. L. No. 104-114, Sec 109, 22 USC 6039, commonly known as the
Helms-Burton Act.
[3] Unless otherwise noted, all annual references are to the U.S.
fiscal year (Oct. 1-Sept. 30).
[4] The total includes modifications to awards made during 1996-2005.
[5] In October 2003, the President established the Commission for
Assistance to a Free Cuba to identify measures to help bring about an
end to the Castro dictatorship and U.S. programs that could assist an
ensuing transition. The Secretary of State chairs the commission, which
includes the Assistant to the President for National Security; the
Secretaries of Commerce, Homeland Security, Housing and Urban
Development, and Treasury; and the USAID Administrator.
[6] This report refers to NGOs that received either grants or
cooperative agreements as grantees. Under a grant agreement, the
grantee is free to implement an agreed-upon development program without
substantial agency involvement. Under a cooperative agreement, the
grantee has a significant amount of independence in carrying out its
program, but the agency is involved in selected areas deemed essential
to meeting program requirements and ensuring achievement of program
objectives. These areas include approval of work plans, designation of
key positions and approval of key personnel, and approval of monitoring
and evaluation plans.
[7] The 14 awards consist of 1 State grant, 1 USAID grant, and 12 USAID
cooperative agreements.
[8] An unsolicited proposal is submitted to the agency independently by
the organization applying for funding. The agency may choose to make a
noncompetitive award based on this proposal. In contrast, standard
grant or cooperative agreements are usually awarded competitively to
organizations responding to an agency request for applications or
proposals. See GAO, Foreign Assistance: USAID Relies Heavily on
Nongovernmental Organizations, but Better Data Needed to Evaluate
Approaches, GAO-02-471 (Washington, D.C.: Apr. 25, 2002).
[9] Material assistance includes shortwave radios, DVD players,
cameras, and office equipment and supplies.
[10] In commenting on a draft of this report, the Principal Assistant
Secretary of State for Democracy, Human Rights, and Labor Affairs noted
that State provides democracy assistance in several countries where it
does not work cooperatively or collaboratively with the national
governments.
[11] By agreement with the Cuban government, USINT is limited to 51
U.S. personnel. These officials are supported by more than 200 Cuban
contract employees.
[12] As of August 2006, about 60 of the 75 dissidents remained in
prison. According to State officials, several of those released
conditionally from prison went into exile.
[13] Reporters Without Borders' Annual Worldwide Press Freedom Index
for 2006 ranked Cuba 165th out of 168 countries--just below China and
Burma and just ahead of Eritrea, Turkmenistan, and North Korea.
[14] Reporters Without Borders' October 2006 report Going Online In
Cuba: Internet under Surveillance said that Cuba is one of the world's
most backwards countries regarding Internet usage--with less than 2
percent of its population online--and that Cuban authorities have
implemented an unjustified system of control and surveillance over
Internet use.
[15] Commission for Assistance to a Free Cuba, Report to the President
(Washington, D.C.: May 2004).
[16] Commission for Assistance to a Free Cuba, Report to the President
(Washington, D.C.: July 2006).
[17] The President's 2007 budget requests $36 million for Radio and TV
Martí, both of which broadcast Spanish-language news and current
affairs programming to Cuba.
[18] Organizations that receive federal funds to provide assistance in
Cuba must comply with regulations administered by Treasury and
Commerce. Treasury and Commerce officials review assistance proposals,
provide guidance on U.S. export and asset control regulations, and
issue licenses to State and USAID grantees.
[19] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1999), p. 19.
[20] In some cases, USINT officials declined to distribute such books
and materials, according to State and USAID officials. In March 2001,
State's Office of Inspector General reported similar problems with
grantee shipments to USINT. See State's Office of Inspector General,
Inspection of U.S. Interests Section, Havana, Cuba, Report Number 01-
FP-R-020 (Washington, D.C.: Mar. 2001).
[21] In 2000, USAID also awarded PricewaterhouseCoopers $163,000 to
evaluate its Cuba program.
[22] National Endowment for Democracy Act, Pub. L. No. 98-164, Tit. V,
22 USC 4411-4416.
[23] The Federal Grant and Cooperative Agreement Act of 1977 (31 USC
6301-6308) "encourages competition in making grants and cooperative
agreements."
[24] Our prior work also suggests that competition provides substantial
benefits to the government. See, for example, GAO-02-471.
[25] Unsolicited proposals are covered by the "Guide to USAID's
Assistance Application Process and to Submitting Unsolicited Assistance
Applications." In technical comments on this report, USAID noted that
one advantage of using unsolicited proposals is that organizations can
submit proposals at any time.
[26] USAID modified 17 agreements to increase funding and extend
completion dates and 11 agreements to extend completion dates. Some
agreements were modified several times.
[27] USAID guidance permits a change of program objectives when
modifications are used to develop an ongoing relationship with a
grantee.
[28] In technical comments on this report, USAID officials said that,
in some cases, justifications can be quite broad, because USAID has the
authority to cite impairment of foreign assistance objectives.
According to these officials, all modifications and extensions were
appropriately justified and cleared through the interagency review
process.
[29] In technical comments on this report, USAID officials said that
the work associated with conducting a competitive process is more
intensive and lengthy than a noncompetitive process, but confirmed that
the justification and approval processes supporting either
noncompetitive awards or noncompetitive extensions of existing awards
are similar.
[30] USINT records indicate that the annual volume of shipments
increased between 2000 and 2005 by about 200 percent--from about 51,000
to 155,000 pounds. U.S. officials estimate that equipment, books, and
other assistance materials distributed by USINT made up about 50-70
percent of the total volume for 2005.
[31] GAO's Standards for Internal Control in the Federal Government
provides an overall framework for establishing and maintaining internal
control, identifying and addressing major performance and management
challenges, and identifying and addressing areas at the greatest risk
of fraud, waste, and mismanagement. GAO/AIMD-00-21.3.1 (Washington,
D.C.: Nov. 1999).
[32] A guide compiled by members of the Grant Accountability Project--
a collection of federal, state, and local audit organizations tasked by
the Comptroller General's Domestic Working Group to offer suggestions
for improving grant accountability. See Domestic Working Group, Guide
to Opportunities for Improving Grant Accountability (Oct. 2005),
available at http://www.ignet.gov/randp/rpts1.html.
[33] In the preaward stage, potential grantees submit applications for
agency review. In the award stage, the agency identifies successful
applicants or legislatively defined grant recipients and awards
funding. The implementation stage, also referred to as the postaward
stage, includes payment processing, agency monitoring, and grantee
reporting, which may include financial and performance information. The
closeout phase includes the preparation of final reports, financial
reconciliation, and any required accounting for property.
[34] USAID, ADS Chapter 303--Grants and Cooperative Agreements to Non-
Governmental Organizations; Section 303.3.9.1(a), Pre-Award Survey
Requirements.
[35] Preaward reviews were conducted for 7 of the 10 grantees we
reviewed. One grantee received two preaward reviews. According to a
USAID procurement official, in accordance with agency guidance,
preaward reviews were not conducted for 3 of the 10 grantees because
they were well-established and had done previous business with USAID.
[36] See Office of Management and Budget (OMB) Circular No. A-110,
Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations. OMB has codified A-110 at 2 CFR Pt. 215, and USAID had
codified the requirements of A-110 at 22 CFR Pt. 226.
[37] We judgmentally selected these 5 agreements from the 13 USAID
agreements in our sample because they represent a broad range of the
types of objectives outlined by Cuba program grantees. A USAID official
confirmed that all of the agreements use standard language from
document-generating software that is modified periodically under the
direction of USAID's Office of Acquisition and Assistance.
[38] The Single Audit Act (31 USC 7501-7507) is intended to promote
sound financial management, including effective internal controls, for
federal awards administered by state and local governments and
nonprofit organizations. OMB Circular No. A-133, Audits of States,
Local Governments, and Non-Profit Organizations, sets standards related
to the Single Audit Act, including a requirement for organizations that
expend $500,000 or more in federal awards during the fiscal year to
have a single or program-specific audit conducted for that year,
including a review of internal controls.
[39] 501(c)(3) status, which is based on a provision in the Internal
Revenue Code, means that the IRS has reviewed an NGO's application for
such status entitling it to exemption from federal taxation, and has
determined that the NGO meets specified criteria, such as being
organized and operated exclusively for a public purpose (such as
charity or education) and not engaging in prohibited activities (such
as lobbying or profit-making). Because the IRS has already performed a
review of an NGO's organization and operation, USAID can reasonably
rely on IRS's prior work and thus needs to conduct a less comprehensive
review using USAID resources.
[40] The USAID program director said that the program office and
grantees were concerned about creating records that might be released
under the Freedom of Information Act, because the release of such
information could damage program activities and/or result in the
harassment or imprisonment of aid recipients in Cuba. However, in
technical comments on this report, USAID officials said that concerns
related to protecting sensitive information have been addressed through
the application of Freedom of Information Act exemptions and, thus, in
the future, will not present an obstacle to recordkeeping.
[41] OMB Circular No. A-110 provides guidance on cost sharing; USAID
has adopted and codified this guidance with some limited modifications
at 22 CFR 226.23. With a few limited exceptions, a grantee receiving
federal dollars under more than one federal grant program may not use
the funds received under a different grant for cost sharing. On this
last point, see GAO, Principles of Federal Appropriations Law (commonly
referred to as "the Redbook"), [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-06-382SP], at 10.E.4 (3rd ed. Feb. 2006).
[42] 22 CFR 226.23 states that cost sharing must meet specific
guidelines. For example, contributions must be verifiable through
recipient records, necessary and reasonable for proper and efficient
accomplishment of project or program objectives, not paid by the
government under another award (except where authorized by federal
statute), and provided for in the approved budget.
[43] This issue arises because NED is a private, nonprofit corporation
established by statute that receives federal funds to carry out its
activities. Under the NED statute, State is required to make an annual
grant to NED out of specific appropriations to carry out the purposes
of the NED statute. NED is prohibited from carrying out activities
directly and is instead required to fund private-sector initiatives
furthering this purpose. Therefore, NED makes grants to private NGOs,
which may at the same time be USAID grantees.
[44] The guide states that agency staff and grantees need sufficient
training so that they can understand the regulations, polices, and
procedures governing grant funds. The guide further states that it is
essential that grantees receive such training, particularly small
entities unfamiliar with all of the regulations and policies. See Grant
Accountability Project, Domestic Working Group, Guide to Opportunities
for Improving Grant Accountability (Oct. 2005).
[45] According to USAID officials, agency policy for closeout reviews
of U.S.-based grantees depends on whether the grantees are subject to
the Single Audit Act. For grantees subject to this act, USAID verifies
that they file an A-133 report before closing out that grant. For
grantees not subject to this act, the Office of Acquisition and
Assistance reviews the project file and consults with the agreement
officer and cognizant technical officer to determine whether a
particular grantee should receive an audit. Factors considered in
making this determination include whether there have been performance
concerns and the benefits and costs of an audit. USAID guidance
instructs agreement officers to "leave open" all grants with open
(unresolved) audit recommendations.
[46] The 10 grantees we reviewed had 13 USAID Cuba awards totaling
almost $50 million, and one State DRL Cuba award of about $2.3 million.
We calculated percentages using the total amount for 14 awards.
[47] Nevertheless, some dissidents in Havana said that they had
received some assistance from one of these grantees. Additionally, the
USAID Cuba program director was able to confirm indirectly that some of
this grantee's shipments had reached Cuba.
[48] Democracy assistance in authoritarian or totalitarian states such
as Cuba is often designed to lay the groundwork for future transitions
and, as such, the impact of that assistance can be difficult to
measure, particularly at an early stage. One democracy expert has
written that "many of the most important results of democracy programs
are psychological, moral, subjective, indirect and time-delayed."
Thomas Carothers, Aiding Democracy Abroad (Carnegie Endowment for
International Peace: Washington, D.C.: 1999, p. 340).
[49] One difficulty in assessing program impact is that USAID has not
identified intermediate outcomes for these objectives. Our prior work
suggests that identifying short-, intermediate-, and long-term outcomes
can help agencies evaluate program results, as required by OMB. For
example, see GAO, Program Evaluation: Strategies for Assessing How
Information Dissemination Contributes to Agency Goals, GAO-02-923
(Washington, D.C.: Sept. 30, 2002).
[50] See, for example, Cuban Democratic Directorate and Center for the
Study of a National Option, Steps to Freedom 2004: A Comparative
Analysis of Civil Resistance in Cuba from February 2004 through January
2005 (Hialeah, Florida: 2005).
[51] The Steps to Freedom reports discuss three levels of nonviolent
acts of civil resistance that range from less to more intense: (1)
protest and persuasion, including organized or spontaneous public
demonstrations of discontent or against specific injustices; (2)
intervention, including creating alternative venues of expression and
association, such as forming independent libraries or labor unions; and
(3) non-cooperation, which implies a general withdrawal of public
support for a government, including refusal to participate in political
activities. The 2004 report states that the number of acts of
intervention declined from 389 in 2002 to 100 in 2004. Comparing the
number of acts of non-cooperation reported in the 2003 and 2004 reports
shows a decline in this category from 37 acts in 2002 to 4 acts in
2004.
[52] The 2000 PricewaterhouseCoopers evaluation report concluded that
the unusual nature of the Cuba program created a heavy workload for
USAID's Cuba program office and that the office was understaffed.
[53] This report refers to nongovernmental organizations receiving
either grant or cooperative agreements as grantees.
[54] Unless otherwise noted, all annual references are to the U.S.
fiscal year (Oct. 1-Sept. 30).
[55] The 14 awards consist of 1 State grant of $2.3 million; and 1
USAID grant and 12 USAID cooperative agreements totaling $49.6
million.
[56] At the time we conducted our site visits, the 10 grantees had
received USAID funding for Cuba democracy assistance for between 2.6
and 8.3 years, with an average of 5.7 years.
[57] GAO/AIMD-0021.3.1 (Washington, D.C.: Nov. 1999).
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