Foreign Assistance: Measures to Prevent Inadvertent Payments to Terrorists under Palestinian Aid Programs Have Been Strengthened, but Some Weaknesses Remain

In May 2009, GAO found that the U.S. Agency for International Development's (USAID) West Bank/Gaza aid program had strengthened its policies and procedures for preventing inadvertent payments to terrorists and complied with them in making new prime awards, but had weaknesses related to compliance at the sub-award level. Specifically, for a random sample of fiscal year 2008 sub-awards, an estimated 17 percent of sub-awards had insufficient evidence to assess compliance related to mandatory clauses and an estimated 5 percent of the remaining sub-awards did not contain the mandatory clauses at the time of the award. GAO recommended that USAID take action to help ensure that the mandatory clauses are included within each sub-award contract or agreement or, when not included in the contract or agreement, there is sufficient evidence to clearly establish that the sub-award has agreed to comply with mandatory clauses at the time the award is made. In response to this recommendation, the USAID West Bank/Gaza mission changed its policies in June 2009 to require that all mandatory clauses be included in the body of the sub-awards above the signature line or, if the mandatory clauses are included in an attachment to the sub-award, a reference to the attachment is included in the body of the award. The mission communicated this policy change to all contractors, grantees, and recipients through a formal memo and training sessions. This action will help USAID prevent inadvertent payments to terrorists under Palestinian aid programs.

In commenting on the report, USAID stated that to implement the recommendation it would issue new instructions to prime awardees. In July 2009, to implement the GAO recommendations, USAID issued new instructions to the mission's prime awardees to help ensure that contracts and agreements contain clear and specific references to attached clauses and clauses likewise contain clear and specific references to the base agreement. USAID also instructed prime awardees to explain any inconsistencies in their monthly sub-award reports. Additionally, USAID required prime awardees to certify that their monthly sub-award reports are both accurate and complete. In February 2012, USAID reiterated its guidance for West Bank and Gaza contractors, grantees and recipients to help ensure that contracts and agreements contain clear and specific references to attached clauses and clauses likewise contain clear and specific references to the base agreement. USAID also changed the form that its format for prime awardees use to certify that their monthly sub-award reports are both accurate and complete. In response to awardee questions following its 2009 actions, USAID has also developed frequently asked questions to help ensure the accuracy of the information being provided for the subaward certification report. USAID also continues to provide training for subgrantees for reporting under the guidance.

In its comments on GAO's draft report, State recognized that it was appropriate to take additional steps to address this recommendation. Since then, State's Bureau of Population, Refugees, and Migration (PRM) has developed a list of activities to assess United Nations Relief and Works Agency's (UNRWA's) efforts in conformance with U. S. conditions on funding, which is documented in Annex 4 of the 2010 U.S.-UNRWA Framework for Cooperation. This action, combined with the other actions State took in response to the report, will help ensure that U.S. funding for Palestinian assistance programs is not inadvertently provided to individuals or entities engaged in terrorist activities.

In its comments on GAO's draft report, State recognized that it was appropriate to take additional steps to address this recommendation. Since then, in the first quarter of fiscal year 2009, State's Bureau of Population, Refugees, and Migration (PRM) began screening all names and entities present in the publicly-available list of United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) contract awards exceeding $100,000 against the Excluded Party List System (EPLS). The U.S. Department of Treasury's Office of Foreign Assets Control list, which contains individuals and entities of concern to the United States and subject to sanctions, is fully integrated in the EPLS database. This action, combined with the other actions State took in response to the report, will help ensure that U.S. funding for Palestinian assistance programs is not inadvertently provided to individuals or entities engaged in terrorist activities.

In its comments on GAO's draft report, State recognized that it was appropriate to take additional steps to address this recommendation. In fiscal year 2010, State's Bureau of Population, Refugees, and Migration (PRM)provided $911,590 to United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) to strengthen its headquarters' internal audit functions as it relates to neutrality. State reported that UNRWA has planned and begun audits to assess the agency's compliance with its neutrality/anti-terrorism policies for contractors; and internal controls for cash assistance; and is further monitoring and reporting on its activities relating to conformance with the U.S. conditions on funding. This action, combined with the other actions State took in response to the report, will help ensure that U.S. funding for Palestinian assistance programs is not inadvertently provided to individuals or entities engaged in terrorist activities.