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

USAID and State support democracy for Cuba by providing awards and  contracts to partners with objectives related to developing civil society  and promoting freedom of information. USAID receives the majority of  funding allocated for this assistance, although State has received 32  percent of funding since it started taking part in the program in 2004. Since 2008, USAID and State have awarded more funds to larger  organizations with a worldwide or regional presence than to the other two  categories of typical awardees: universities, and smaller organizations  that focus only on Cuba. Typical program beneficiaries  also include Cuban community leaders, independent journalists,  independent bloggers, women, and youths. In fiscal years 1996 through 2011, Congress appropriated $205 million for  Cuba democracy assistance, appropriating 87 percent of these funds  since 2004. We  reviewed 29 recent awards and contracts to determine the extent to which  partners use subpartners to implement program activities. USAID and State legal officials said that the agencies ensure that  program activities directly relate to democracy promotion as broadly  illustrated in related program legislation. In addition, they said that organizations are  expected to work with agency program officers to determine what  activities are permitted or appropriate, and whether Department of  Treasury and Commerce authorizations, as required, already exist  for  delivery of various types of assistance or whether the organization must  instead apply for a license. Furthermore, they noted that program  partners and subpartners, including subpartners based in other countries,  are expected to spend U.S. government funds consistent with U.S. laws  and that requirements in primary award agreements and contracts  generally flow down to any subpartners. However, we found gaps in  State’s financial monitoring efforts. For  financial monitoring, USAID has hired an external auditor to perform  financial internal controls reviews of its partners, and has used a risk- based approach considering criteria such as award value and prior issues  identified to determine the coverage and frequency of the 30 reviews the  auditor has conducted. These reviews have identified financial  management, procurement, and internal controls weaknesses that USAID  has taken steps to address. As a result,  State was not provided with the detailed information that officials told us  would have been required for State to have approved 91 subawards and  subcontracts that were obligated under eight of its recent awards. USAID and State Are Taking Steps to Improve Their Performance Monitoring to Address Weaknesses in Some Partners’ Performance Planning and Reporting

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

USAID has taken steps to improve its ability to monitor its Cuba program  partners’ performance, by working with them to improve their  performance planning and reporting. In September 2012, State/DRL awarded funding to an external auditor to  perform financial internal controls reviews in fiscal year 2013. State did not conduct financial internal controls reviews for more than  two-thirds of its awards during fiscal years 2010 through 2012, although  State recently awarded funding to an external auditor for this purpose and  has taken steps toward implementing a risk-based approach for these  reviews. To obtain sufficient information to approve implementing partners’ use  of subpartners, provide clear guidance to implementing partners  regarding requirements for approval of the use of subpartners, and  monitor implementing partners to ensure that they adhere to these  requirements. Appendix I: Objectives, Scope, and Methodology

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

Since 1996, Congress has appropriated $205 million to USAID and State to support democracy assistance for Cuba. Because of Cuban government restrictions, conditions in Cuba pose security risks to the implementing partnersprimarily NGOsand subpartners that provide U.S. assistance.
For this report, GAO (1) identified current assistance, implementing partners, subpartners, and beneficiaries; (2) reviewed USAIDs and States efforts to implement the program in accordance with U.S. laws and regulations and to address program risks; and (3) examined USAIDs and States monitoring of the use of program funds. This report is a publicly releasable version of a Sensitive But Unclassified Report that GAO issued in December 2012.

What GAO Found

The U.S. Agency for International Development (USAID) and Department of State (State) provide democracy assistance for Cuba aimed at developing civil society and promoting freedom of information. Typical program beneficiaries include Cuban community leaders, independent journalists, women, youths, and marginalized groups. USAID receives the majority of funding allocated for this assistance, although State has received 32 percent of funding since 2004. In recent years, both USAID and State have provided more funding for program implementation to for-profit and nongovernmental organizations (NGO) with a worldwide or regional focus than to universities and to NGOs that focus only on Cuba. All types of implementing partners, but worldwide or regional organizations in particular, used subpartners to implement program activities under 21 of the 29 awards and contracts that GAO reviewed.
USAID and State legal officials view the Cuba democracy programs authorizing legislation as allowing the agencies discretion in determining the types of activities that can be funded with program assistance. Agency officials added that the agencies ensure that program activities directly relate to democracy promotion as broadly illustrated in related program legislation. The officials stated that organizations are expected to work with agency program officers to determine what activities are permitted or appropriate. In addition, they said that program partners and subpartners are expected to spend U.S. government funds consistent with U.S. laws, and that requirements in primary award agreements generally flow down to any subpartners.
USAID has improved its performance and financial monitoring of implementing partners use of program funds by implementing new policies and hiring contractors to improve monitoring and evaluation and to conduct financial internal controls reviews, but GAO found gaps in States financial monitoring. While GAO found some gaps in implementing partners performance planning and reporting, both agencies are taking steps to improve performance monitoring. For financial monitoring, USAID performs financial internal controls reviews of its implementing partners with the assistance of an external auditor. Since 2008, USAID has used a risk-based approach to determine the coverage and frequency of the 30 reviews the auditor has conducted, which have identified weaknesses in implementing partners financial management, procurement, and internal controls. However, because of resource constraints, State did not perform financial internal controls reviews for more than two-thirds of its implementing partners during fiscal years 2010 through 2012. State procured an external financial auditor in September 2012 that plans to review more than half of States implementing partners, and has taken steps toward implementing a risk-based approach for scheduling these reviews. Federal regulations generally require agencies to approve the use of subpartners. GAO found that USAID issued specific guidance in 2011 to its implementing partners on requirements for subpartner approval. While State told GAO it has similar requirements, States requirements are not clearly specified in its written guidance. As a result, State was not provided with the information it would have needed to approve at least 91 subawards and subcontracts that were obligated under eight awards.

What GAO Recommends

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