Awards. To address identified problems  with awards, since 2006, the Cuba Program has competitively awarded all  democracy assistance grants and discontinued its use of funded grant  extensions. In addition, in some cases the impact of these actions on the risk of Cuba  Program grantees’ misusing funds and failing to comply with U.S. laws and  regulations is not yet apparent. USAID Is Increasing Resources for Cuba Program Grant Oversight

To increase resources aimed at improving the management and oversight  of Cuba Program democracy assistance, USAID established a Cuba project  committee comprising key USAID and State senior managers in December  2006; has hired more staff for the Cuba Program office since January 2008;  and contracted for financial services—including reviews of grantee  internal controls, procurement practices, and expenditures—to enhance  oversight of grantees in April 2008. Preaward reviews and follow-up. Permitted assistance. In addition, the new financial services contractor will review grantee  support for cost-share claims. Impact of USAID’s Actions to Improve Oversight Is Not Yet Evident

Because many of USAID’s actions to improve its oversight of the Cuba  democracy grants were implemented recently, in 2007 and 2008, their  impact on the risk of grantees’ misusing grant funds or failing to comply  with U.S. laws and regulations is not yet evident. Additionally, in mid-July 2008, USAID  decided to accelerate planned reviews of Cuba democracy grantees’  procurement systems under the April 2008 financial review services  contract and to conduct audits of grantees’ incurred cost under the  Inspector General; pending the results of those reviews and audits, USAID  partially suspended two more grants. The procurement reviews, which  were completed in August 2008, identified weaknesses at three grantees;  USAID is working with the grantees to correct these weaknesses. USAID  expects the incurred cost audits to be completed by November 2008 under  a contract with another firm. In July 2008, USAID suspended its $10.95 million grant to GAD,  which was awarded in September 2000. The program’s other grants  remained active, based on USAID’s review of the grantees’ A-133 audits  and other relevant information, but pending the results of the procurement  reviews and incurred cost audits announced in July 2008. The  procurement reviews, completed in August 2008, identified internal  control, financial management, and procurement weaknesses at three  grantees. Recommendations for Executive Action

To strengthen oversight of USAID’s Cuba Program grants and the  program’s ability to ensure the appropriate use of grant funds, we  recommend that the USAID Administrator take the following two actions:   ensure that the Cuba Program office is staffed at the level that is needed to  fully implement planned monitoring activities, such as the systematic  analysis of grantee data to identify at-risk grantees, and that the agency  has determined is necessary for effective oversight; and   periodically assess the Cuba Program’s overall efforts to address and  reduce grantee risks, particularly with regard to grantees’ internal  controls, procurement practices, expenditures, and compliance with laws  and regulations. Appendix I: Scope and Methodology

To review the actions that U.S. Agency for International Development  (USAID) has taken since 2006 to improve its award and oversight of the  Cuba Program’s grants as well as actions taken in response to the recently  detected misuses of program grant funds, we analyzed USAID and  Department of State (State) records, including agendas and minutes for  meetings of USAID’s Cuba project committee, draft and final changes to  agency policy and guidance, and audit and financial reports of grantee  activities.
Why GAO Did This Study

The U.S. Agency for International Development's (USAID)Cuba Program provides assistance to support human rights and promote nonviolent democratic change in Cuba. From 1996 through 2008, the program awarded $83 million in grants to nongovernmental organizations and universities. In 2006, GAO found weaknesses in program oversight that increased the risk of grantees' improperly using grant funds and failing to comply with U.S. laws. In 2008, misuse of grant funds at organizations with the program's two largest grants was detected. GAO was asked to examine (1) actions that USAID has taken since 2006, or plans to take, to improve its award and oversight of the Cuba Program's grants and (2) actions that USAID has taken in response to the recently detected misuses of grant funds. GAO analyzed USAID and grantee records, conducted limited reviews at five grantees, and interviewed agency and grantee officials.

What GAO Found

Since 2006, USAID has taken a number of steps to address identified problems with the Cuba Program's awards of democracy assistance and improve oversight of the assistance. For example, USAID has competitively awarded all Cuba Program grants since 2006, compared with 5 percent of grants awarded in 1995-2006; has hired more staff for the program office since January 2008; and contracted in April 2008 for financial services--such as reviews of grantee internal controls and procurement systems--to enhance oversight of grantees. USAID also has worked to strengthen program oversight by, for instance, ensuring preaward and follow-up reviews, improving grantee internal controls and implementation plans, and providing guidance and monitoring about permitted types of assistance and cost sharing. However, USAID has not staffed the Cuba Program at the level the agency has determined is needed for appropriate oversight; as of October 2008, the program office had five staff, compared with the 11 recommended in two USAID assessments. Further, because many of USAID's actions to improve oversight were initiated recently, their impact on the risk of the program grantees misusing grant funds or failing to comply with U.S. laws and regulations is not yet evident. In June 2008, for example, USAID's new financial services contractor found unsupported purchases at the organization with the program's largest grant. In response to the misuse of funds at organizations with the two largest Cuba Program grants, USAID suspended the two grantees in March and July 2008, respectively, pending the results of criminal investigations. To detect financial vulnerabilities at other grantees, USAID announced in mid-July 2008 that it would accelerate planned reviews of program grantees' procurement systems and initiate audits of their incurred cost, and it partially suspended two additional grantees pending the results of the procurement reviews. The program's other grants remained active pending the results of these reviews and audits. The procurement reviews--completed in August 2008 by the new financial services contractor--identified internal control, financial management, and procurement weaknesses at three grantees; USAID is working with the grantees to correct these weaknesses. The USAID Inspector General will oversee the incurred cost audits, which USAID expects to be completed by November 2008 under a separate contract with another firm.