USAID is the agency  primarily responsible for implementing the bilateral aid program, while  State oversees annual contributions to international organizations,  primarily to UNRWA, for the multilateral program. “No contributions by the United States shall be made to the United Nations Relief and  Works Agency for Palestinian Refugees in the Near East except on the condition that the  United Nations Relief and Works Agency takes all possible measures to assure that no part  of the United States contribution shall be used to furnish assistance to any refugee who is  receiving military training as a member of the so-called Palestinian Liberation Army or any  other guerrilla type organization or who has engaged in any act of terrorism.”
This clause is commonly referred to as “section 301(c).”
State is responsible for implementing section 301(c) and, in that capacity,  oversees U.S. contributions to UNRWA. USAID Strengthened Its Antiterrorism Policies and Procedures and Complied with Them in Making New Prime Awards, but Has Weaknesses in Compliance at the Subaward Level

Since 2006, USAID has strengthened its antiterrorism policies and  procedures to help ensure that assistance is not inadvertently provided to  terrorists. This specialist is responsible for conducting recurring  compliance reviews of prime awardees’ subaward activities. USAID Complied with Its Strengthened Antiterrorism Policies and Procedures at the Prime Award Level

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

All prime awardee and subawardee non-   U.S. organizations or individuals (16 years  old or older) proposed to receive cash or      in-kind assistance under a cooperative  agreement, grant, or subgrant. We found that all 32 new prime awards made by USAID in fiscal year 2008  contained the appropriate mandatory clauses—the antiterrorism and  naming clauses—and, where applicable, USAID had obtained the  advanced antiterrorism certifications, as required under Mission Order  21. Insufficient Evidence to Assess Subaward Compliance with Requirements Related to Mandatory Clauses

Based on our random stratified sample, we estimate that 17 percent, plus or  minus 7 percentage points, of all fiscal year 2008 subawards identified by  USAID did not contain sufficient evidence to determine whether the  mandatory clauses were included in the subaward at the time the subaward  was made. State and UNRWA Have Strengthened Policies and Procedures to Determine Whether UNRWA’s Actions Are Consistent with Its Agreement to Conform with Conditions for Receiving U.S. Funds, but Weaknesses Remain

UNRWA has agreed with State to take steps to conform with the condition  on U.S. contributions set forth in section 301(c) of the Foreign Assistance  Act of 1961, as amended, and report to State on its efforts semiannually. For example, State has  not defined what would constitute nonconformance or developed written  definitions of key terms, including “all possible measures”—a concern we  also raised in 2003—that would help serve as criteria for analyzing  UNRWA’s semiannual reports. State Has Strengthened Some Policies and Procedures to Oversee UNRWA’s Conformance with U.S. Conditions on Contributions, but Limitations Exist

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

UNRWA reported denying approximately 110 applications for  discretionary cash assistance to refugees since July 2006 because agency  investigations found the refugees’ behavior was inconsistent with UN  neutrality or restrictions related to section 301(c). However, the list is limited to those individuals or entities affiliated with  Al-Qaida and the Taliban and thus does not specifically include major  regional groups, such as Hamas and Hezbollah, which the United States  has designated as foreign terrorist organizations. Regarding prime  awardees’ fiscal year 2008 subawards identified by USAID, required vetting  occurred and applicable antiterrorism certifications were obtained. UNRWA has  strengthened its policies and procedures to conform with conditions on  U.S. funds, such as expanding screening of all recipients of UNRWA funds  against the UN 1267 list, but UNRWA’s internal audits do not determine  whether UNRWA contractors have signed contracts that include the  required antiterrorism clause or assess controls for UNRWA’s overall cash  assistance program. Appendix I: Objectives, Scope, and Methodology

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

The U.S. government is one of the largest donors to Palestinians. It provided nearly $575 million in assistance in fiscal year 2008. This assistance is provided through the U.S. Agency for International Development (USAID) and through contributions to international organizations, primarily the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). The Department of State (State) oversees U.S. contributions to UNRWA. To help ensure that U.S. funds for these programs are not provided to individuals or entities engaged in terrorist activities, USAID and State must comply with restrictions under U.S. law. GAO was asked to (1) assess the extent to which USAID has complied with its antiterrorism policies and procedures and (2) assess State's and UNRWA's policies and procedures to support conformance with U.S. statutory conditions. GAO reviewed U.S. and UNRWA documents; interviewed USAID, State, and UNRWA officials; and conducted fieldwork in Israel, Jerusalem, and Jordan.

What GAO Found

USAID strengthened its antiterrorism policies and procedures and complied with them in making new prime awards, but had weaknesses related to compliance at the subaward level. ("Prime awardee" refers to an organization that directly receives USAID funding to implement projects. "Subawardee" refers to an organization that receives funding from prime awardees.) USAID strengthened its policies and procedures in response to our 2006 recommendations by, for example, strengthening its vetting process, which involves investigating a person or entity for links to terrorism. Since 2006, USAID has instituted new procedures to monitor prime awardee compliance with antiterrorism requirements, which have allowed it to take some actions to address areas of concern. The agency has hired a specialist who reviews prime awardees' subaward files for compliance with its antiterrorism policies. All 32 new prime awards made by USAID in fiscal year 2008 included all applicable clauses. USAID obtained the applicable antiterrorism certifications and conducted required vetting for all applicable new prime awards. For a random sample of fiscal year 2008 subawards, applicable antiterrorism certifications were obtained and vetting was conducted. However, an estimated 17 percent of subawards had insufficient evidence to assess compliance related to mandatory clauses. For the remaining subawards, an estimated 5 percent did not contain the mandatory clauses at the time of the award. GAO also found limitations in the agency's monitoring of subawards for inclusion of mandatory clauses. Since 2003, State and UNRWA have strengthened policies and procedures to conform with conditions on U.S. contributions to UNRWA, but weaknesses remain. Section 301(c) of the Foreign Assistance Act of 1961, as amended, prohibits U.S. contributions to UNRWA except on the condition that UNRWA take all possible measures to assure that no part of the U.S. contribution shall be used to furnish assistance to, among others, any refugee who has engaged in any act of terrorism. UNRWA has agreed to conform to conditions on U.S. contributions, but State has not established criteria to determine whether UNRWA's actions are consistent with this agreement. While State has not defined the key term "all possible measures" or defined nonconformance, it has strengthened some policies and procedures to oversee UNRWA's conformance. UNRWA has strengthened policies and procedures to promote neutrality of its beneficiaries, staff, contractors, and facilities that cover a broader range of conduct than covered in section 301(c). UNRWA reported denying approximately 110 applications for cash assistance to refugees since July 2006, because the agency found the refugees' behavior was inconsistent with UN neutrality or restrictions related to section 301(c). However, limitations exist. UNRWA said it has screened all staff, contractor, and beneficiary names against a UN Security Council list of potential terrorists and found no matches. However, the list does not include Hamas and Hezbollah, which the United States has designated as foreign terrorist organizations. Finally, internal UNRWA audits do not assess controls for all cash assistance programs or whether contracts contain antiterrorism clauses.