[Senate Hearing 114-688]
[From the U.S. Government Publishing Office]
S. Hrg. 114-688
STATE DEPARTMENT AND USAID MANAGEMENT CHALLENGES AND
OPPORTUNITIES FOR THE NEXT ADMINISTRATION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON STATE DEPARTMENT
AND USAID MANAGEMENT,
INTERNATIONAL OPERATIONS, AND
BILATERAL INTERNATIONAL DEVELOPMENT
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
DECEMBER 8, 2016
__________
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COMMITTEE ON FOREIGN RELATIONS
BOB CORKER, TENNESSEE, Chairman
JAMES E. RISCH, Idaho BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida BARBARA BOXER, California
RON JOHNSON, Wisconsin ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona JEANNE SHAHEEN, New Hampshire
CORY GARDNER, Colorado CHRISTOPHER A. COONS, Delaware
DAVID PERDUE, Georgia TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia CHRISTOPHER MURPHY, Connecticut
RAND PAUL, Kentucky TIM KAINE, Virginia
JOHN BARRASSO, Wyoming EDWARD J. MARKEY, Massachusetts
Todd Womack, Staff Director
Jessica Lewis, Democratic Staff Director
Rob Strayer, Majority Chief Counsel
Margaret Taylor, Minority Chief Counsel
John Dutton, Chief Clerk
SUBCOMMITTEE MEMBERSHIP SUBCOMMITTEE ON STATE DEPARTMENT
AND USAID
MANAGEMENT, INTERNATIONAL OPERATIONS, AND
BILATERAL INTERNATIONAL DEVELOPMENT
DAVID PERDUE, GEORGIA, Chairman
JAMES E. RISCH, Idaho TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia BARBARA BOXER, California
RON JOHNSON, Wisconsin CHRISTOPHER A. COONS, Delaware
RAND PAUL, Kentucky CHRISTOPHER MURPHY, Connecticut
(ii)
C O N T E N T S
----------
Page
Perdue, Hon. David, U.S. Senator from Georgia.................... 1
Kaine, Hon. Tim, U.S. Senator from Virginia...................... 2
Linick, Hon. Steve A., Inspector General, U.S. Department of
State, Washington, DC.......................................... 3
Prepared statement........................................... 23
Responses to Additional Questions............................ 28
Calvaresi Barr, Hon. Ann, Inspector General, U.S. Agency for
International Development, Washington, DC...................... 5
Prepared statement........................................... 34
Responses to Additional Questions............................ 42
(iii)
STATE DEPARTMENT AND USAID MANAGEMENT CHALLENGES AND OPPORTUNITIES FOR
THE NEXT ADMINISTRATION
----------
THURSDAY, DECEMBER 8, 2016
U.S. Senate,
Subcommittee on State Department and USAID
Management, International Operations, and Bilateral
International Development,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:15 a.m., in
Room SD-419, Dirksen Senate Office Building, Hon. David Perdue,
chairman of the subcommittee, presiding.
Present: Senators Perdue [presiding] and Kaine.
OPENING STATEMENT OF HON. DAVID PERDUE,
U.S. SENATOR FROM GEORGIA
Senator Perdue. The committee will come to order.
This hearing of the Subcommittee of the State Department
and USAID Management, International Operations, and Bilateral
International Development--only in Washington can we come up
with names like that--is titled State Department and USAID
Management Challenges and Opportunities for the Next
Administration.
I would like to begin by welcoming our distinguished guests
and witnesses: Inspector General of the State Department and
Broadcasting Board of Governors, Steve Linick, and Inspector
General of the U.S. Agency for International Development,
USAID, Ann Calvaresi Barr. Welcome. Thank you both so much for
taking your time today and to be back before us. And welcome
back.
The Inspectors General before us here today are charged
with evaluating and assessing State and USAID's programs and
operations and making recommendations to strengthen their
integrity, effectiveness, and accountability. As such, the
Inspectors General are dedicated to detecting and preventing
waste, fraud, abuse, and mismanagement. As we move forward into
a new administration which will have new leadership and fresh
ideas, I wanted to take the opportunity to bring you up--to
really focus--to visit with us again, to focus again on the
management piece of this mandate.
We understand that you have both put out recent reports on
major management and performance challenges for each of your
respective agencies, and these contained key recommendations
for what the next administration should prioritize. We have a
lot of ground we can cover today, but there are some core
things you have identified as challenges that I want to mention
first: protecting our people and facilities overseas, No. 1;
No. 2, managing posts and programs in conflict areas; No. 3,
information security and management; No. 4, oversight of
contracts and grants; and, lastly, meeting transparency and
reporting requirements. We have got a lot to do today if we
cover all of that.
These challenges impact our ability to operate in conflict
zones, keep those serving our Nation safe, ensure that our aid
is doing what is intended, and that congressionally mandated
transparency requirements are being met, and to protect the
integrity of the IT systems these agencies rely on. We look
forward to and welcome your suggestions on how these challenges
should be addressed by State and USAID, and how the incoming
Trump administration should prioritize and tackle these issues.
Before we get started, I would also like to welcome back
our ranking member today, Senator Kaine. Senator Kaine has been
a stalwart on the Foreign Relations Committee in reaching
bipartisan consensus here. I respect him greatly and appreciate
his leadership, mentoring, and participation.
And, with that, I would like to thank and recognize our
ranking member, Senator Tim Kaine.
STATEMENT OF HON. TIM KAINE,
U.S. SENATOR FROM VIRGINIA
Senator Kaine. Thank you, Mr. Chair. And I echo those
comments. It has been a treat to be the ranking member on this
subcommittee with you for 2 years, and to be at this last
meeting of our subcommittee. And it is a very important topic.
And I welcome both of you and thank you for your service.
I understand, Mr. Linick, you are feeling a little under
the weather today, and so we will--we will not stint on our
tough questions----
[Laughter.]
Senator Kaine [continuing]. But we will understand if the
answers are abbreviated.
IGs have a difficult mission, challenging mission,
important mission, regardless what agencies they serve. But,
given the overseas nature of the work that is done in USAID and
State, the challenges that you each face in your roles, I
think, are significantly advanced. And I thank you for the good
work that you do.
This hearing is meant to dig into your recent reports and
talk about performance and management challenges for State and
USAID as we move into the next administration. Obviously, top
priority is responsibly spending taxpayer dollars. And that is
a key function of what the IGs are charged with. As we continue
to expand our presence around the globe, and we have expanded
it greatly in the last 15 years, many programs can be
susceptible to fraud, waste, abuse, if not just poor
implementation challenges. And we see that in testimony before
the Armed Services Committee, and we deal with the same issue
there with DOD all the time. And this is, I know, something
that you focus significantly on.
Senator Perdue mentioned that an important piece of what we
do is try to establish performance and management metrics. This
is one of the reasons that he and I get along so well. We--we
are into the management by data, management by results. If you
do not measure, you do not really know how you are doing. But,
you have to measure the right things to give your organizations
the right incentives to be effective. And we want to talk about
that. Managing these overseas complexes, managing the safety of
our folks overseas, having the right tools in place for that
are critically important.
And, as we have concluded an election, where there has been
a lot of discussion about cyber hacking of institutions, even
electoral institutions, and State has been the subject of cyber
hacks in the past, knowing what we ought to be doing to protect
our infrastructure--cyber infrastructure is a key interest that
I think we both share and I know that you will address.
So, I am eager for your recommendations. I appreciate your
service. I am glad that we are doing this hearing this morning.
Thanks, Mr. Chair.
Senator Perdue. Thank you, Senator Kaine.
We will introduce our witnesses now. I would ask you to
keep your opening remarks to 5 minutes; of course your written
testimony will be submitted in the record.
First, we have The Honorable Steve Linick, Inspector
General of the U.S. Department of State, Broadcasting Board of
Governors. Mr. Linick began his tenure as Inspector General for
the State Department in September 2013. Prior to his
appointment, he served for 3 years as, first, Inspector General
of the Federal Housing Agency. Mr. Linick was an Assistant
Attorney in California and Virginia. He also served as both
Executive Director of the Department of Justice's National
Procurement Fraud Task Force and Deputy Chief of its Fraud
Section, Criminal Division.
During his tenure at the DOJ, he supervised and
participated in white collar criminal fraud cases involving,
among other things, corruption in contract fraud against the
U.S. in Iraq and Afghanistan. In his current capacity,
Inspector General Linick is the senior official responsible for
audits, inspections, evaluations, investigations, and other law
enforcement efforts to combat fraud, waste, and abuse within,
or affecting the operations of, the Department of State,
Broadcasting Board of Governors.
Mr. Linick, welcome.
STATEMENT OF HON. STEVE A. LINICK, INSPECTOR GENERAL, U.S.
DEPARTMENT OF STATE, WASHINGTON, D.C.
Mr. Linick. Thank you. And I apologize for my voice. I am
delighted to testify before you today and talk about the work
of the Office of Inspector General for the Department of State.
So, I would like to thank you for the opportunity.
I also want to thank this committee for its interest in,
and support of, our work; in particular, for sponsoring the
legislation intended to expand our hiring authority and to
obtain information regarding misconduct by senior Department
personnel. This legislation is critical to our work, and we
really appreciate that.
By way of background, our office oversees the operations
and programs of the State Department, and the Broadcasting
Board of Governors, which include more than 70,000 employees
and over 270 overseas missions and domestic entities. And,
aside from the sheer breadth of the work we have to oversee,
the Department of State's OIG is unique, because, unlike other
Inspectors General, we are statutorily required to inspect all
overseas posts and bureaus in the Department. So, let me turn
to some of the more important aspects of our recent work.
First, as I testified previously, one of our top priorities
is helping to protect the people who work for the Department
around the world. And, although the Department has continued to
make improvements in overseas safety and security over the last
18 months, challenges still remain. And, through our
inspections and our audits, we continue to find deficiencies
that put personnel at risk. Since I last testified, we have
particularly focused on health and safety issues overseas,
emergency action plans, and maintaining physical security at
overseas posts.
Second, the security of information system remains a focus.
The Department has spent a substantial amount of money over the
past few years, but we are still concerned about the protection
of the Department's IT infrastructure. For example, in recent
months, we have reported significant weaknesses in the
Department's Cybersecurity Incident Response Program. At the
same time, I am pleased to report one important area of
improvement, and that is our own IT systems. When I last
testified here, I described our IT network as a major
challenge. At the time, our network was connected to the
Department's systems, and vulnerabilities in the Department's
unclassified network directly affected our own system. In
August, we migrated to our own independent IT system.
Finally, the Department does face continuing challenges
managing contracts and grants. To date, we have issued numerous
reports and management assistance reports related to these
topics, and we have opened numerous investigations on contract
and procurement fraud. And we are concentrating our efforts on
the Department's weaknesses in managing high-value critical
contracts, including those in the conflict zones.
I now turn to our initiatives. When I testified last time,
I described several new initiatives. These programs are no
longer new, but they are now an integral part of our day-to-day
work processes. We have continued to use management assistance
reports and management alerts to bring specific issues to the
attention of senior management quickly, without waiting for the
conclusion of longer-term audits and inspections.
Second, our Office of Evaluations and Special Projects,
which was established in 2014, is now well established and
continues to focus on systemic issues, special assignments, and
whistleblower protections.
And finally, our work in connection with overseas
contingency operations is well integrated into our overall
mission, and our staff is working closely with DOD and USAID
OIGs to oversee those operations.
Next, I would like to address our primary ongoing
challenge, which is what I discussed the last time I testified
before you. Unlike other IGs, our office is not consistently
given the opportunity to investigate allegations of criminal or
serious administrative misconduct by the Department's
employees. Department components, including the Bureau of
Diplomatic Security, are not required to notify us of
allegations that come to their attention. Accordingly, we
cannot undertake effective independent assessments and
investigations of these matters as envisioned by the Inspector
General Act. We have been negotiating with the Department to
address these limitations on our ability to conduct oversight
for about 2 years, but the problem persists. Clearly, your
legislation is needed to address this serious limitation, and I
welcome your continued support as this Congress ends and the
new one begins.
Finally, I would like to discuss the significant impact of
our work. In my written testimony, I included some financial
metrics that demonstrate the way we help return money to the
American taxpayers. But, these measurements do not fully
reflect our most critically important work, which is helping to
safeguard the lives of people who work in or visit our posts
abroad, and protecting the Department's information reputation
and the integrity of programs.
Chairman Perdue, Ranking Member Kaine, I want to thank you
for this opportunity, again. And I want to emphasize that our
accomplishments are a credit to the talented and committed
staff that I have had the privilege to lead. And I want to
publicly thank them for their relentless pursuit of excellence.
I look forward to your questions.
[Mr. Linick's prepared statement is located at the end of
this hearing on page 23. ]
Senator Perdue. Thank you, Mr. Linick.
Now we will turn to Ms. Calvaresi Barr.
Previously, Mrs. Calvaresi Barr served as Deputy Inspector
General at the U.S. Department of Transportation. She also
spent 25 years at the U.S. Government Accountability Office,
where she served as Director of the Acquisition and Sourcing
Management Team, and earlier worked overseas to evaluate
defense, national security, and foreign disaster assistance
programs. In her role as USAID Inspector General, Ms. Calvaresi
Barr oversees more than $20 billion in U.S. foreign assistance
and development programs worldwide.
I think you were just confirmed before this committee just
a little over a year ago, so we welcome your comments today and
thank you for coming again.
STATEMENT OF HON. ANN CALVARESI BARR, INSPECTOR GENERAL, U.S.
AGENCY FOR INTERNATIONAL DEVELOPMENT, WASHINGTON, D.C.
Ms. Calvaresi Barr. Chairman Perdue, Ranking Member Kaine,
and members of the subcommittee, thank you for inviting me to
take part in this important hearing. As you know, I am charged
with overseeing up to $15 billion spent annually on foreign
assistance provided by USAID, MCC, USADF, IAF, and OPIC. Today,
I will focus on the major management challenges USAID faces in
carrying out its missions--its mission, and the reforms my
office has taken to create a model OIG.
We identified five USAID challenges that need particular
attention in fiscal year 2017. These challenges stem from the
inherent complexities in coordinating and implementing foreign
assistance: poor project design, monitoring, and a lack of
capacity to execute and oversee USAID-funded projects, and weak
internal controls. Managing the complexities of working in
areas beset by conflict, instability, or natural disaster is a
longstanding challenge for USAID. According to the agency,
these environments require flexible responses. We agree that
some flexibility is needed to adapt to country contexts, but it
must be tempered with discipline.
Our investigations related to responses in Syria and other
countries expose fraud schemes involving collusion, product
substitution, inflated billing, and false claims. These schemes
demonstrate the extent to which ad hoc approaches can leave
USAID programs vulnerable to abuse and raise serious concerns
about implementers' contracting processes and USAID's
oversight.
Reconciling priorities in operations that involve multiple
U.S. agencies also present significant challenges. Our work in
Pakistan and the Middle East found that USAID employees often
struggle to balance USAID's development priorities with other
agencies' aims. In response, USAID's administrator recently
engaged State Department leadership to discuss solutions.
Another challenge relates to program design and monitoring.
Poor design has limited the impact of USAID projects, or
disrupted them before they began. Monitoring has been
constrained by unreliable data as well as insufficient
guidance, staffing shortages, and a lack of employee training.
Such weaknesses derailed USAID's plans to use a multi-tiered
approach to monitor activities in Afghanistan. Ultimately, only
one of 127 awards made between 2013 and 2014 used multi-tiered
monitoring.
Program sustainability also remains a challenge,
particularly as it relates to securing host-country commitment
and assessing local capacity. For example, a project in Haiti
lacked a plan to transfer responsibility for paying healthcare
workers' salaries at 80 facilities after USAID's role ended and
the Haitian Government could not pay them. In addition, five
U.S.-funded roads in the West Bank are deteriorating because
the Palestinian Authority did not allocate funds to support
road maintenance.
Finally, longstanding internal control weaknesses have
limited USAID's ability to meet Federal financial management
requirements, including reconciling transactions between USAID
and other agencies.
Complying with the government's complex information
security requirements has also proved challenging. While USAID
has made great strides in implementing FISMA and removing
significant deficiencies, concerns remain about the CIO's
ability to exercise appropriate authority and the independence
of USAID's FISMA compliance reviews.
To provide the oversight needed to help USAID address these
complex challenges, I have seized opportunities to improve our
own operations. It begins with a vision for how we scope our
work and how we execute that work, moving away from auditing
and investigating individual programs and projects to targeting
weaknesses that cut across all the entities that we oversee.
This crosscutting work will provide solutions that link
Washington-based strategies to field-level implementation.
To better position my staff to carry out this work, I have
initiated a number of reforms. First, I added more rigor to how
we prioritize our work. Second, I called for matrix teams
comprised of audit, investigations, and technical staff from
headquarters and the field, and consolidated 11 overseas
offices into four regional hubs. Third, I have taken steps to
revitalize our workforce by recruiting new leaders, elevating
performance standards, setting expectations for inclusivity and
leadership, and identifying the training and resources all
staff need to succeed. Finally, I have solidified our
independence by establishing a cooperation memo with the USAID
Administrator to formalize OIG's authority. We are also working
to reclaim responsibility for closing out our recommendations.
OIG remains committed to providing reliable and meaningful
oversight and ensuring that we, as well as entities we oversee,
achieve the highest return on taxpayer dollars. Given the risks
in providing foreign assistance, this is no easy task, but it
makes our work, and this subcommittee's sustained interest,
critical to ensure we get it right.
This concludes my prepared statement, I am happy to take
any questions you might have.
Thank you.
[Ms. Calvaresi Barr's prepared statement is located at the
end of this hearing on page 34.]
Senator Perdue. Thank you, Ms. Calvaresi Barr.
And thank you both for your statements and for your
submissions to the record.
We will start our questioning. And, just to manage the
time, there is a Democratic Caucus meeting at 11:15, and
Senator Kaine will probably have to excuse himself. If I have
another question or two, we will continue with those questions
in his absence; we are allowed to do that. But, I think we
should be able to manage the questions in that time.
We will start with Ranking Member Kaine.
Senator Kaine. Thank you, Mr. Chair.
And thanks, to the witnesses.
I want to start, Mr. Linick, on the cyber issue. My
understanding is that there are two bureaus at State that have
responsibility for cyber and IT security, the Information
Resource Management IRM) and Diplomatic Security (DS), and both
have responsibility. Talk to me a little bit about the
stovepiping issue of having two different branches responsible
for this, the degree of duplication or gaps, the degree of
current coordination and recommendations that you might have
with respect to making State more effective in this area. We
were all aware of the stories about foreign intrusion into the
State Department networks in March of 2015. Please talk a
little bit about how you are trying to tackle that challenge.
Mr. Linick. Thank you, Ranking Member Kaine.
The issue of dispersion of authority between DS and IRM is
a serious issue. As I just testified, we have seen a number of
significant recurring deficiencies in their IT system over the
last 5 years. We think a number of them are created by a lack
of coordination.
Let me give you a specific example:
One of the issues we have seen is employees who do not use
their email accounts for a period of 90 days, those accounts
are supposed to be disabled, because hackers can get in, or
anybody can get in and use those emails for nefarious purposes.
The Department has not disabled many of those accounts. And
that is a coordination issue.
We have seen other deficiencies occur as a result of this
coordination issue. And it goes to a larger recommendation,
which we have made to the Department, which is, the CIO, who
works for IRM, currently reports to the Under Secretary for
Management, and so does DS. We do not believe that the CIO is
properly positioned to control IT security at the Department.
It is not clear that the CIO gets information about security
risks from other bureaus. We have asked the Department to take
a look at that.
The other thing is, the CIO--one of our key recommendations
to address the deficiencies we have found in their IT system
has to do with the fact--while the Department's working on it,
they do not--they have not implemented an IT risk-management
structure which identifies risk, assesses risk, monitors risk,
and so forth. And the CIO has got to do that. I know they have
been working on it. But, we believe that is key in order for
the Department to get its hands around this problem.
So, with that kind of risk-management system, the
Department would be able to figure where it currently stands,
from an IT perspective, where it needs to be, what the
opportunities for improvement are, and how to communicate their
risk to the Department.
Senator Kaine. You gave me two different examples, and, in
the second one, you indicate that there is effort underway at
the State Department to grapple with the recommendation you
made. How about on the first one, the notion of a CIO being
placed differently in the organization, to have a more
comprehensive oversight of these cybersecurity matters? What is
the response that you have gotten from State on that? Please
explain that to us.
Mr. Linick. Well, our recommendations with the Department
consider the positioning of the CIO. And the Department has
come back and said that they have considered the position, and
he will remain where he is. That is my understanding of it.
However, this risk-management plan that I have discussed can
identify the roles and responsibilities of various players and
give the CIO the power and authority and the clear guidance
that he needs in order to have the kind of control in order to
implement, you know, an IT system, a security system.
Senator Kaine. Let me ask about another aspect of cyber. I
am on the Armed Services Committee, and we spend a lot of time
in dealing with DOD about the same issues. Within DOD, there
are some interesting projects and programs to deal with cyber
issues. There is a program called Hack the Pentagon, which
gives incentives to hackers to find and report vulnerabilities
in DOD networks. And then the Air Force has something called an
IT Swat Team, which is private-sector IT professionals that
have agreed to come in and help the Air Force rapidly, if there
are intrusions, deal with those. Are there similar projects or
efforts underway at State to quickly deal with cyber intrusions
or even encourage hackers to report vulnerabilities so that
they can then be fixed?
Mr. Linick. Yeah. I do think--I mean, they have spent
several billion dollars over the last few years on trying to
improve the system. I know they have been working hard to do
it. I know they are partners with other agencies to help them--
including DHS--to help them detect hackers and so forth. I know
they have provided more tools to staff, and they have been
working hard at training, as well. So, I know they have taken a
lot of steps. We really think a lot of this has to do with just
having a better handle on all the risks and being able to see
the entire organization and prioritize those risks.
Senator Kaine. I want to go to the State Department folks
and say, ``Hey, now you tell us what you are doing in response
to these recommendations.'' And so, I appreciate that
testimony. Maybe we will have the opportunity to do that with
State Department folks, especially on the two points that you
mentioned.
I want to ask Ms. Calvaresi Barr this question. I
understand that USAID is rolling out changes to its policy
guidance. I see that it is called ADS201--I do not know that
that is--but, basically, it is policy guidance about increasing
the ability of implementing partners to be adaptive and
creative in their execution of aid programs. So much of the
great work of USAID is through implementing partners.
Talk to us a little bit about that effort. What guidance
would you give to us so we can both support but then also
assess the degree to which the relations between USAID and its
implementing partners are as effective as they can be?
Ms. Calvaresi Barr. Senator Kaine, thank you for that
question. I think it is probably one of the more important
questions that could be asked.
USAID relies on implementing partners to deliver foreign
assistance, right? So, right off the bat, you have to have
assurance that those implementers have strong internal
controls; you have to ensure that they are going to report,
they are going to monitor, they are going to check, they are
going to get back to us and know whether the goods (the
services and the foreign assistance) are getting where they
need to go.
One thing that we have pointed out, time and time again in
our work across the board, is a culture within USAID which
views its implementers more as partners. So, as a result, we
are seeing sort of a lack of the kind of rigorous oversight we
would like to see from USAID to its implementing partners. And
I think the best way to point that out is that you look at our
work that our special agents have done in investigations. That
is the effect. That is the effect of those weak internal
controls. That is the effect of the vulnerabilities, not really
knowing what is being shipped, what is reaching the desired
entities. And in the case of Syria, in our cross-border
operations from Turkey and Jordan, we found rings of corruption
on product substitution, false claims, a whole host of issues.
And we have put tremendous, tremendous pressure on USAID, as
well as its implementing partners, to stand up and to have a
better grasp on that. We stood up a Syria Investigations
Working Group, where we pull the bilaterals together in that
area. We work with State, we work with other entities to talk
about where we have cracked down on fraud. Who are these
partners? Who are the vendors? Who are the implementors?
Because much of this money is going to other entities, and they
may be using the same bad apples. So, there needs to be that
kind of rigorous oversight put in place.
My point here is, we are doing it, as the Office of the
Inspector General, from our investigations standpoint. We would
like to see AID do more of that. So, the design of the
programs, the monitoring, the evaluation, it certainly does
need to be addressed.
Particular concern--and I will just end on this point--is,
almost half of USAID's money goes through U.N. agencies. We do
not have oversight over those public international
organizations. That is a vulnerability. So, we have partnered
very, very closely with them. In fact, I just got a call
yesterday from the World Food Programme IG, and we are going to
meet next week, actually, to talk about what needs to be put in
place. We have suggested to USAID, ``You just do not turn over
the money. Put conditions on that money, even if it is going to
the PIs. Half of that money is going to them. You should put
strings attached, conditions on the transfer of that money.''
That is beginning to happen. It has not happened before. Hence,
what we see in Syria. Hence, what we see in Afghanistan. Hence,
what we see in Africa, when it comes to global health. I could
go on and on.
Senator Kaine. So, even though you do not have the ability
to exercise your function with respect to monies going to these
U.N. agencies, you can put pressure on USAID to put strings on
the money and make sure that they are trying to get the U.N.-
related agencies to up their own internal controls.
Ms. Calvaresi Barr. Absolutely. It goes to the heart of
your question, What about monitoring and evaluation? What can
they do? They need to look at these implementors, not so much
as partners. They have to know what their internal control
processes are. They need to know what they know about the
vendors and the subcontractors they are going to be working
with. What are their internal controls? And they have to put
risk-mitigation factors in place to account for that. That is
risk management.
Senator Kaine. Let me ask both of you this question. Both
State and USAID work in environments that are permissive and
also in environments that are nonpermissive. I think I can
intuit the answer to this question, but I think it is an
important one to get on the record and for folks to understand.
Talk about how the work of each of these agencies in
nonpermissive environments--how does being in a nonpermissive
environment change the work that an IG's office needs to do?
Ms. Calvaresi Barr. Okay, I would be happy to start.
Certainly, it makes it more difficult because in a
nonpermissive environment you cannot be out there. The reliance
becomes even greater. You are looking to others to go in-
country for you. That is why these U.N. agencies are so
critical to USAID because they are the ears and the eyes, and
that is the footprint on the ground. That is the importance of
having implementors that have our best interests in mind, that
are interested in getting the return on every taxpayer dollar
possible.
So, these issues that we have found in our top management
challenges, these cut across permissive and nonpermissive
environments. What I would say to this is, when you are in a
nonpermissive environment, you cannot be there on the front
line.
One example where I think USAID could do better. I
mentioned the Syria program. We cannot go into Syria. But, our
U.N. partners can go in. OFDA sent out a DART team to assess
where the need was and make sure the supplies get there. It was
our agents, not that DART team, that actually went to the
warehouse and looked at what was supposed to go across border,
Is this what it should be? Is it up to the quality it should
be? So, we asked the question ``We are there, why is USAID not
there?'' So, those are some of the things where we are pulling
out, we are recommending, we are pushing in our reports. You
need to have levels of review. Their multi-tiered monitoring
approach, which they have been talking about for many, many
years as the end-all/be-all for those situations, I think I
mentioned here in my opening statement, one of 127 awards used
that approach. And what that approach is--we know we cannot get
in there, so we have got to work with the governments, we have
got to work with our NGOs.--We have got to work with the other
implementors. We have to have creative strategies for
documenting the actual receipt of these goods. We need reports
that come back.--In Afghanistan, one of 127 awards used it. Our
recommendations are targeted at getting that much better than
that kind of estimate.
Senator Kaine. Mr. Linick, on the same issue about
permissive versus nonpermissive environments, and then I have
one workforce question before I hand it back to the Chair.
Mr. Linick. The State Department is clearly working in
providing foreign aid in nonpermissive environments, lots of
it, you know, in governance programs, nonlethal aid working in
Syria and Iraq and so forth. And it is a serious limitation,
these nonpermissive environments, to monitor whether or not the
goods or the services are being delivered as they should be.
The State Department has sort of a mixed record on this.
Some bureaus are using alternate means to compensate for that:
use of third-party contractors, use of GPS, use of
teleconferencing, talking to grantees in third countries. There
are quite a few ways to get around this. And we are actually
looking at those ways to see how effective they are.
In other bureaus, they are not using these methods. And
part of it is because there is no directive that provides a
minimum standard for monitoring and evaluation. That is
something we are looking at.
Senator Kaine. I want to ask one workforce question and
then just an observation about workforce. Within the DOD--
again, from my Armed Services experience--the senior executive
service personnel, senior officers often attend very extensive
planning curriculum to focus on things like contract
management, et cetera. And my observation is that State and
USAID Foreign Service Officers usually have a shorter rotation,
with fairly limited training in planning and contract
management, even though they are expected to do similar work.
So, as I compare the kind of training on planning and contract
management on the DOD side, versus the State side and the USAID
side, I think State and USAID do not get the same amount. What
can we do to foster more of a planning and training culture
within the organizations?
Ms. Calvaresi Barr. Okay, this is certainly an issue that
we have highlighted. The lack of training for the folks that
are actually in charge of determining the programs following
from a country development strategy, what the program should
be, what the vehicle should be. And I think what we have found,
across the board, is that, No. 1, the training is not there
that is needed. This is huge project management. We might start
with a $1 million grant. That can amp up very, very quickly
because of changing situations. And then, when you are in a
contingency operation where the need is tremendous, you have
the staff actually overseeing 11 projects in that area. If they
are not trained, if the right number of folks are not there, if
there are not alternative strategies for how to monitor it--not
a one-size-fits-all approach to this--then you are going to see
the effect that we see, time and time again. It sounds like a
broken record.--They are not achieving the goals that they
established; the data is unreliable; we are not sure they are
meeting where they need to be. So, training is absolutely at
the heart of this.
You mentioned Foreign Service. I think, you know, a
complicating factor with this, because of the nature of that
personnel system, folks are in, they are in for, you know, 2
years--in contingency settings, 1 year--and they are out. So,
you overlay that with the continual change that goes on, and I
think it is certainly a recipe for tremendous, tremendous
vulnerability in achieving the program.
Senator Kaine. Mr. Linick?
Mr. Linick. Senator Kaine, you raise what I think is one of
the most important issues for the new administration to look
at. In the State Department,--there is little emphasis on
project management. They are working on it. And they have been
working on it for a while. But, really, people go to the State
Department because they want to be diplomats, and they do not
want to have to manage contracts and grants and do all these
things. It is a collateral duty for many. As you mentioned,
Foreign Service Officers are rotating in and out of these
posts--1, 2, 3 years. You know, they will serve as grant
officer representatives, and then they move on to another post.
So, you know, many grants have one, two, three grant officer
representatives. They do not have the training, they do not
have the staffing. Grant officers and contract officers are
really not held accountable for oversight. You have got RSOs,
regional security officers, who are also designated as
contracting officers at posts, who are supposed to be managing
the local guard contracts, but also making sure that the posts
are secure from attack. This is a real problem, and we have
made a number of recommendations to the Department to enhance
accountability. It needs a better system for inventory and
contracts and grants. It needs more training; it needs more
resources. and it needs to be given the kind of priority that
other topics do. Because, ultimately, in our view, effective
management means effective diplomacy. And at the end of the
day, this should be an organization which is also focused on
the taxpayers.
Senator Kaine. Let me offer--let me just offer one last---
not a question, just an observation, and then--and I appreciate
the Chair letting me just drone on with 15 minutes of
questions. And I am anxious to hear his questions.
When I travel on CODELs, usually I combine travel for Armed
Services and Foreign Relations purposes. And I have embarked on
a habit I really love, which is, wherever I am, I go to the
Embassy and I ask to meet with first- and second-tour FSOs,
often people from USAID, and other folks that are connected
with the Embassy. I just want to hear what their life is like.
And I am always so impressed with the qualifications of people,
and their experiences. We are doing a better and better job of
thanking the military for their service. I do not think we
often thank nonmilitary American employees enough, especially
those who are deployed into high-risk settings around the
world. But, I always ask them this question, ``You have a job
that is very competitive to get. I mean, especially anybody who
has passed the Foreign Service exam--extremely competitive to
get, so you are to be congratulated for that. Tell me what will
be the difference between you staying and making this a career
and you leaving to do something else.'' I ask that question,
and then I just listen, usually for about an hour. One of the
things I hear a lot is this,--and it is in your wheelhouse as
you are making recommendations to State or USAID and kind of
seeing how they implement those recommendations. Foreign
Service Officers tell me that they had to go through such an
intense security vetting to get this job, but, for them to get
a few dollars to go to a conference they have to fill out
things in triplicate, as if they could not be trusted. They
wonder how they were allowed to get through the vetting process
if they could not be trusted. They understand that there needs
to be a check against fraud and abuse, but they are still
frustrated at being treated as if they could not be trusted,
often for minor expenditures.
Obviously, we have to have a balance, in terms of putting
mechanisms in place to appropriately manage and protect the
taxpayer dollar at the same time. When we put people through
the--you know, one of the most intense vettings that anybody
gets in our operation, then there ought to be a degree of
respect and trust that comes with that.
So, I just wanted--you do not need to comment--but I just
wanted to tell you that is something that I hear as I travel
around the world and try to say thank you to the people doing
these important jobs. And you might want to consider that.
And I will now hand it back to the Chair.
Thank you.
Senator Perdue. You know, I can relate to that when I am
going through security at the airport, myself. [Laughter.]
Senator Perdue. Thank you for those insightful questions.
You know, let me follow up on that line of thought. You
know, one of the great things about this job is, we do get to
travel, and we do get to see our men and women in uniform and
our State Department personnel around the world. And it really
is an unbelievable thing to realize that the best of America is
in uniform in our military, and the best of America is in our
Embassy and diplomatic efforts around the world. I mean, it
really is a very encouraging realization to come to as a new
member. And I am worried about the continued safety and their
careers. You know, I think Senator Kaine just talked about
that. I mean, we talk about that in here a lot. The retention
of really good people in any enterprise is a key success
factor.
I am worried about their safety, Mr. Linick, and I know you
have talked about that before. And when I look at both your
reports, they are so insightful. And if we could just implement
everything in your reports, we would all be much better off.
But, I am a little concerned when I see repeat recommendations,
and there are a number in here. And the one that I want to call
out and get you to speak to it very quickly. This is about
Embassy security. Past events have proven that these embassies
are, indeed, in danger at times. And so, we have to take this
very seriously for the security of our people. But, in your
testimony, you stated that Until the Department fully
implements the IG's recommendations intended to improve the
process to request and prioritize physical security needs, it
will be unable to identify and address all physical security-
related deficiencies. And then you said that without taking
such steps, the Department will be unable to make informed
funding decisions.
We had a meeting here earlier this year talking about how
expensive it is to build the embassies, and the overruns and so
forth. That is not what I am looking for here. What I am really
looking for are the hindrances going on in State, and why is
this a repeat recommendation? And, looking forward to the next
year, how receptive has State been to your recommendations, and
how would you advise us to continue to look at that? If safety
of our diplomatic corps is one of the top priorities, it seems
to me that we need to make sure that these recommendations are
taken seriously.
Mr. Linick. Senator, I think the issue of why do
deficiencies continue to appear is a complex question. There
are posts all over the world. There is lots of ground to cover.
The world is a dangerous place. And there are probably lots of
reasons why we continue to find issues. One thing we think
would be a simple fix and would contribute to the Department's
ability to address these issues is just having a database of
all the security needs, the deficiencies around the world, so
the Department knows how much money it needs to spend, where
the highest-priority security issues are, and so forth. The
Department has made progress. We made this recommendation in
2014. They have a database. They have not populated the
database. They just need to do that. But it has been a couple
of years. So, again, it is a planning function. You do not know
what you have unless you understand what the universe of needs
are.
The other thing I would say is--and this is another issue I
think the new administration ought to look at that relates to
the issue of dispersion of authority in the IT context--it is
the issue of the need to enhance our mechanisms for
accountability, particularly in the security area. Two key
recommendations came from the Benghazi Accountability Review
Board, one had to do with making sure that risk management is
conducted at the highest levels of the Department. And that is
very important for the new administration to undertake,
particularly where we are sending folks in harm's way and we
cannot mitigate risk. It ought to be done at the highest
levels.
The other issue is in terms of security. You know, we have
had 12 Accountability Review Boards, from Dar-es-Salaam to
Benghazi. And in Benghazi, we found that 40 percent of the
recommendations made by the Benghazi Accountability Review
Board were repeat recommendations--training, information-
sharing, et cetera. Why is that? Largely because it did not
have leadership pushing down those recommendations. With
changes of administrations a lot of these issues get delegated
to the bureaus. That needs to be implemented from the top, as
well. And they have actually put something in the FAN to
require that the Deputy Secretary make sure that they oversee
the implementation of those recommendations.
Those are the primary reasons. We continue to find
deficiencies all over the world, whether it is, not having the
right setback or not having hardened doors, et cetera. Those
are the root causes, and leadership needs to be on top of this.
Senator Perdue. I notice, in London, in Singapore, and in
Islamabad, that some of those recommendations have been
incorporated into new construction--setback rules, et cetera.
Is that correct, in terms of these priority embassies?
Mr. Linick. Yes. After the Benghazi Accountability Board,
the Department implemented many of those recommendations, and
that has improved security at posts all over the world by
sending more Marine security guards and enhancing training. So,
the answer is yes, they have progressed.
Senator Perdue. We had the privilege of visiting, in Melon,
Spain, a Marine contingent, and one of their primary missions
is to be there as the first call for embassies in Africa. And I
know Senator Kaine has a son, a young Marine who is out there
in harm's way; so we want to make sure those guys are well
funded.
Mrs. Calvaresi Barr, you noted in your testimony--this is a
specific question, but you called it out, that you are seeking
to align the USAID IG system of pay for Foreign Service
investigators with that of the rest of the Federal law
enforcement community, just to create a level playing field.
Can you speak to that just a minute, about the deficiency and
what we need to think about here in Congress to help get that
rectified?
Ms. Calvaresi Barr. Thank you, Senator Perdue, very much
for that question. Of the many challenges I confronted when I
took over as IG, this is probably been one of the more
disruptive to my organization internally.
Senator Kaine. Has it--excuse me--has it affected retention
since you have been there, in the last year?
Ms. Calvaresi Barr. It will if we do not have a fix soon,
so let me try to take a very complicated issue and make this
simple.
I oversee two personnel systems. One is Civil Service, one
is Foreign Service. When it comes to our criminal investigators
on the Civil Service side of the house, our criminal
investigators get a law enforcement availability pay, known as
LEAP, and it allows them to receive 25 percent more over their
base salary, up to a GS-15 step 10. And what that pay is for is
to ask them to work for a minimum of 50 hours and be available
anytime, going forward.
For commissioned Foreign Service Officers, LEAP does not
exist. So, my predecessors, many before me, in wanting to bring
parity to the system, instituted special differential. So, the
special differential was instituted to essentially bring the
salaries to about the same because these are the Foreign
Service criminal investigators that are in Syria, are in
Afghanistan; and certainly, they should at least be entitled to
the same pay, not only within my organization, but across
government. Right? LEAP. So, they put a special differential in
place for them. What they also did, though, is they put a cap
on that differential. Recently, there was a challenge to the
IG's ability to put a cap on that special differential.
We are seeking legislation that would allow us to set the
pay rate similar to the rate of the Civil Service, because if I
do not, every imaginable scenario will directly affect what you
asked me--recruitment and retention--or disparity. If I do not
put a cap on those salaries, those criminal investigators will
receive $40,000 more than their counterparts, in excess of
$200,000 a year in their salary. If I take it away--they are
going to fall way below that. I am not going to be able to
retain or recruit.
Folks at that level, at the FSO 1--level, are our special
agents in charge. They run the operations regionally. This has
been one of the more difficult things that I have had to deal
with in our organization. So, we appreciate that we have worked
very closely with your staff and other committees' staff to get
a legislative fix to this so that we can just bring parity into
the mix. And it would go a long way.
Senator Perdue. Well, we are working with you. We really
hope that we can create that level playing field. This is
something that is obvious to those of us who see it from the
outside.
Ms. Calvaresi Barr. Thank you.
Senator Perdue. Let me ask both of you this. This is
something that we see. We have a new President coming in, in
January, who has outside business interests and so forth. So,
the conflict-of-interest issue is now front and center at the
highest level--inside the State Department, inside USAID,--as
in all of government. But I want to talk specifically here
about someone who might moonlight with a second job, what are
the procedures, going forward, that we need to look at to
ensure that there is no conflict of interest with their day
job?
Mr. Linick?
Mr. Linick. Well, Senator, there are ethics rules and
criminal rules which prohibit conflicts of interest--financial
conflict of interest, in particular. We get allegations, in the
investigations area, of conflicts of interest. We get them
routinely, and they are pretty common.
Senator Perdue. Are there training processes inside both
institutions to educate people----
Mr. Linick. Well, there is required ethics training, and we
looked at the Department's ethics,--how they conducted ethics
training. And I would have to get back to you for specifics
about that. We have it within our own office; we take it very
seriously. This is something that we deal with more on an
allegation-by-allegation space.
Senator Perdue. But, from a proactive standpoint, are there
things that the IG Department does, interacting with people?
Ms. Calvaresi Barr, do you want to speak to that?
Ms. Calvaresi Barr. I would be happy to, and I agree
completely with what Mr. Linick said here about the rules and
the regulations. There is ethics training across the board.
One thing that our Office of Investigations did was put
together an integrity working group within USAID. We have
USAID's general counsel; we have people from civil rights
there; we have people from the management bureau there; we have
people from security there, and we are there. And we talk about
employee integrity matters, conflicts of interest obviously
being one of them.
I can tell you that we are not, certainly, missing in terms
of getting requests for us to do investigations. It is a best
practice to set something like that up to make it clear that
this all needs to come to the Office of the Inspector General.
These meetings that we have on a monthly basis, all those
matters are discussed. One thing I will say very, very strongly
about USAID on this matter, they refer those things to us, the
most egregious ones; we talk about all of them, and they let us
have at them.
So, I think that this is a good model, a best practice. And
again, I am very proud of my staff for coming up with the idea
that we have got to pull this together and pull the right
stakeholders just to have discussions such as this.
Senator Perdue. Thank you.
Mr. Linick, I want to go to the IT area. This was a top
topic last year, and it seems to be a strong part of your
report again this year. You brought to light some serious
issues that the State Department and the IG face preventing
your office from being as effective as you would like. Can you
provide an update on the issue of independence of the State
Department and OIG, and the integrity of those investigations?
And what about the independence of your IT network? I know we
talked about that last year, as well.
Mr. Linick. Well, fortunately, we have migrated to our own
independent network. And last year when I testified, I
expressed concern about the integrity of the information on our
network--investigative information, audit information, grand
jury information--and access to that information by folks. We
have no evidence that the Department, just to clarify, actually
has access to that. The problem is, we did not have firewalls
and controls between our agencies to prevent that. So, we have
moved to our own independent IT system, and our work now is
secure.
Senator Perdue. Well, that is great news. I know Senator
Kaine has to leave. And we thank you so much for being with us.
Ms. Calvaresi Barr, can I get you to comment on the same
thing? You have only been there a year. Have you seen the same
sort of thing. What are your comments on the IT function inside
USAID?
Ms. Calvaresi Barr. Yes. So, first, I would just start
off--from an independent standpoint, one of the first things I
did within the first month was establish a memorandum of
understanding about the IG's authorities and independence, and
the need for that, that Administrator Gail Smith sent out to
all folks within USAID. And that has gone a long way to stress
the role, the responsibility, and the authorities we have. And
that has played out extraordinarily well.
With regard to IT systems, we do maintain our own servers,
but there are certainly opportunities, if there is somebody
nefarious within USAID proper that would want to try to hack
in, whether it be through email accounts or other things, those
walls and those structures are not as effectively built. We--
some of the new leadership I talked about, that I have brought
in--one individual, in particular, very, very strong in our
Office of Management, along with our great staff--our Director
of IT and her staff--are working on ways to build in more
security to those systems.
But, we do have our own servers. I think we need to go a
little bit further, because I would not be truthful if I said
that it is completely foolproof and nobody can get into these
systems. We have work to do on that--in that regard.
Senator Perdue. I think that is fair.
Mr. Linick, in your testimony, you stated that your office
was--you may have given me this thing. I hope not. [Laughter.]
Mr. Linick. I hope not.
Senator Perdue. I am kidding. I am actually on the down
side of the same thing.
I am concerned about the absence of mitigating action plans
for high-risk areas concerning oversight of contractor
operations. That is an issue your office has raised before. You
have issued four reports in the last years identifying these
problems. Give us an update, if you will, on how State has gone
about implementing your recommendations. Are you satisfied with
the progress of those recommendations? And I know you just
talked about, last year, that they made dramatic progress. Give
us an update through this year. And also, you have made
recommendations repeatedly. Some of those come back. And so,
this, again, speaks to the fact that the issue shows up again
this year. Can you just speak to that again, please?
Mr. Linick. Well, we do make a lot of recommendations, and
some of them are implemented, and others are not implemented.
And we try very hard to follow up and follow through in terms
of compliance once we issue a recommendation. In some
instances, if it is a serious recommendation or if we are not
seeing compliance, we will actually go back out and do a
compliance follow-up review. It is a whole new team that goes
out to check to see whether or not recommendations are
accepted--you know, are complied with and so forth. We do not
have the ability to require the Department to follow our
recommendations. All we can do is make recommendations and hope
they implement them.
The one thing that has really been a help for us, though,
we have made a number of recommendations that Congress has
actually latched onto and incorporated into legislation. So,
for example, our recommendations and some of our management
alerts are in our contracting. The Department is required,
through legislation, to report to Congress on its
implementation of those recommendations. Some of the most
critical recommendations in the contracting area, including
basic stuff like setting up an inventory for contracts and
grants, holding contractors and--excuse me--contracting
officers, contracting officers' representatives accountable,
things like that. So, that is the most helpful way that we can
ensure that the Department follows up on our recommendations.
But the bottom line is a mixed bag, and we try to identify the
most significant recommendations and bring them to the
attention of the Department.
Senator Perdue. Well, going down the contractor issue that
you raised, Ms. Calvaresi Barr, you note in your testimony that
contract design flaws led to complications in Haiti in the
implementation of an $88 million grant. But, there was about
$12 million in question; --I think it was in an anti-malarial
program, if I am not mistaken. Can you speak to that and then
speak to what you have done to prioritize controls around that
to avoid those in the future?
Ms. Calvaresi Barr. Yes. Design is absolutely crucial to
get it right. That is the foundation for any sort of
development assistance going right. And I think what we are
finding is, within USAID, when they develop their country
development strategy, specific projects follow from that. A
number of things have to be looked at. You have to put the best
practices in place with regard to delivering the aid, whatever
that aid is that you are delivering there. Your goals have to
be reasonable, and they have to be reasonable based on the
environment in which you are working. So, USAID's emphasis is a
lot on local solutions to provide sustainability, going
forward. Let us invest in those local entities to make sure
that the aid sticks. So, we talk ourselves out of business. We
go in, and they can keep things working. But, you just cannot
throw money at it and hope that it works. You have to assess
capacity. You have to say, ``Do these entities that the money
is going to even know what internal controls are?'' If they do
not know what they are, does the money need to go more towards
technical assistance to get them amped up to be able to receive
this kind of money?
So, in the examples that we provided, time and time again,
with that being one, we had a less than rigorous look at the
best practices, an assessment of the capacity, a reporting back
of what we are getting.
One thing that I will say that OFDA has recently done--and
we have seen this in Afghanistan, which I think is another best
practice--is, rather than throwing all of the money out,
especially if you have weak monitoring and reporting coming
back or data that is less than reliable, which we found across
the board on our monitoring work, how about incremental
funding? So, it makes the AORs, the CORs, those monitoring,
say, ``Okay, here is the first tranche. What did we accomplish?
Hey, if we are not getting where we need to be, what is it? Did
we pick the wrong vehicle? Was the cost-share arrangements that
we hoped we would get back from the government or the other
entities, are they not standing up to their commitment?'' And
then, recalibrate and change to get it right. But, we see, too
often, the design on those principles that I mentioned as
flawed in the beginning, and that is just going to have
ramifications, going forward. That was just one example of
many.
Senator Perdue. Thank you.
My last question really has to do with the reforms that you
guys have both brought to your respective responsibilities. Can
you just bring us up quickly on what reforms in the past year
you have been able to implement? And then, the parting question
here is, Are there other reforms that we need to be a partner
with here legislatively or the things that--to help improve
your oversight capability--the things that we need to do in
changing the law to help you? I would like a brief answer here,
but if you would like to submit an answer in writing to that,
we would welcome that for the record, as well.
Mr. Linick?
Mr. Linick. Okay. So, Senator, to answer your first
questions, in terms of reforms, I would divide it up into two
baskets of reforms. One is internally, and externally.
Internally, our people are our most important asset. We want to
make sure that they have the proper work environment, they have
the systems, and so forth. We have worked hard, and this is
something that is continuing to improve--management systems,
the quality assurance of our work, internal controls, workflow,
and so forth, making sure the people have adequate space, that
the culture in the office is right. And these are things that
we have been working on consistently for the last few years.
Externally, we are trying to be more effective at what we
do. We are trying to aim at the highest risks to the
Department, trying to be more efficient and effective. A few
things we have done: our inspections division now operates on a
risk-based system, so we are trying to be very smart about how
we inspect, where we inspect. We look at a number of factors:
how much money a post has, the complexity, the size, and so
forth. And we might have different kinds of inspections,
depending on the risk factor. We might send bigger teams to
higher-risk places, smaller teams to lower-risk places. We may
look at one function, like security, or we may look at all of
the functions. We may look at just morale and leadership. So,
those are the kinds of things.
In addition, we created the Evaluation Special Projects
Unit to be a rapid-response unit to handle whistleblower
claims, administrative misconduct, and other special
assignments, our management alerts and management assistance
reports to get information to the highest levels of the
Department quickly about urgent issues or systemic issues, and
data analytics is something we are really trying to use in an
integrated way throughout OIG.
Senator Perdue. Ms. Calvaresi Barr?
Ms. Calvaresi Barr. I remember, Senator Perdue, you asked
me, during my confirmation hearing, what was I going to do to
get my arms around the organization and move it forward? So,
let me come back to that. I mentioned three things: work,
process, and people. And it is something I have lived by in
every leadership position that I have been through.
On the work front, we have done tremendous, tremendous work
in the past, but what we have done is, we have targeted
individual programs across all the countries that we are in--
and we had that structure that had 11 offices, and I can tell
you, it was like having 11 different IG offices--transformed
that into four regional hubs. Our work now is going to be more
crosscutting. In addition to my oversight responsibility for
USAID, I have those additional other entities that I oversee.
So, work that we can do that is crosscutting, work that we can
do that follows, as Mr. Linick said, high-priority areas of the
Hill, high-priorities areas within the entities that we are
overseeing, high priorities from work that we have identified.
We have got to hit those things where there are big programs.
For example, if we do an audit of Power Africa, Power
Africa is getting at USAID's investment, it is getting at
MCC's, it is getting at OPIC's, it is getting at ADF. We have
to do that. The recommendations in our reports, then, that I
can bring forward talk about systemic issues and lends itself
to the kind of oversight hearings you could have with those
officials about what their responsibility is to get this right.
So, work clearly, you know, is number one.
Processes, just very quickly, we needed to bring ourselves
up to date with the best practices for how we do things within
audit, things within investigations--new prioritizations, new
audit planning guides, new templates and guidance--so that we
are providing streamlined efforts so that our reports to you
are as timely as they can be. Because if they are not timely,
they are not relevant, and you cannot use them. So, I would
highlight that.
I have established an Office of Quality Assurance and
Review that did not exist before. I am hiring a business
process engineer to totally rebaseline our processes and bring
some best practices into it. Communications officer, training
director--none of that was in our office before, and that
speaks to the people part of it. We have tremendous people at
this agency, that have been with my office for a very, very
long time.
As I said, I have a pretty high standard on expectations,
and I would like to think I hold myself to those, as well. And
I set those standards. And I had the opportunity to bring in a
fairly new bench of senior executive leaders along with all the
existing leaders that have really proven already that they have
the chops to get this done the way I want it done, with
leadership, engagement, coaching, and inclusivity. And we are
investing in our folks to do that.
Finally, on the notion of what else we can do, going
forward, thank you very much for the question on the pay issue.
That is first and foremost--LEAP is one. A separate issue for
me has to do with our authority with regard to OPIC, oversight
of OPIC. The Foreign Assistance Act only gave limited
authority, does not allow us to do financial statements. In
short, the appropriations bill says, ``USAID, OIG, coordinate
with OPIC's president, board, and come up with a MOU on the
work that you are going to do.'' So, when I think about an IG's
role--and I have been in this business for 32 years now--the
fact that I have to negotiate what my oversight is going to be,
and then I have to get it locked and loaded, and, if there is
another issue that comes up that I want to look at, oops, it
was not in the plan that was agreed to, the MOU--it is not
working for me, it has not worked for the agency for a long
time, so I think that that one is most important to me, as
well.
Senator Perdue. I am concerned about that, as well. I see
that in your report. And, in my business career, that is the
one that always jumped off the page at me, as well.
Ms. Calvaresi Barr. Okay.
Senator Perdue. I am very sensitive to that.
Thank you both for your testimony, and thank you for your
tireless effort. I know providing oversight and accountability
sometimes can be a thankless job, but I want to tell you, it is
very much appreciated by this subcommittee and the committee at
large. I want you to know your work is really making a
difference. And informing us here in the Senate is so important
that we get an objective look at these departments. I mean,
these are tremendous departments. We are spending $54 billion,
all in, between State and USAID today, and it is up from 20
billion under the Clinton administration. So, under the last
two Presidents, this thing has really kind of exploded to be a
major investment around the world, and yet we see the needs
around the world, both from our own internal security of State
Department, but also the help that aid is giving around the
world today is tremendous, relative to what we are trying to
accomplish from a foreign policy standpoint. So, that is why
these hearings are so important, to get this information on the
record and to see the ball move down the field accordingly.
It is through our diplomatic and foreign assistance
agencies that we have been able to bring hope and opportunity
to those most in need while also furthering peace and U.S.
interests around the world. We cannot forget that oftentimes
the meal a Syrian child receives, or the HIV/AIDS medication a
mother in Africa receives, may be the first and only thing they
learn about America. And so, we must ensure that the aid we
provide is helpful, safe, and accountable, and that our people
delivering that are safe.
Most importantly, we cannot continue to help others if we
do not maintain the trust of those who make this aid possible--
the American taxpayer--which is why these hearings are so
insightful and important to maintain trust in that
accountability.
We will close now, but the record will remain open until
Friday, close of business, for those wishing to submit
additional questions. We may have a question or two, as we just
mentioned. And also, I want to take the privilege here, sitting
in the Chair. I want to thank and make a quick--just take a
quick moment to thank Major Jim Purekal, of the United States
Marine Corps, who is here with us today. He happens to be my
congressional military fellow for the past year. Major Purekal
has been invaluable in advising me personally, and our team,
about the inner workings of military and national security. He
moves now to the Senate legislative liaison. But, the thing I
want to call out about his career, he was a helicopter pilot
for Air Force 1, and so he brings a distinguished career to the
Senate, and we look forward to working with him over the next
year.
So, Major, thank you very much. [Applause.]
Senator Perdue. Thank you.
Thank you again for your work and your testimony.
This meeting stands adjourned.
[Whereupon, at 11:30 a.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Prepared Statement of Steve A. Linick
Chairman Perdue, Ranking Member Kaine, and members of the
subcommittee, thank you for inviting me to testify today regarding the
work of the Office of Inspector General (OIG) for the Department of
State (Department) and the Broadcasting Board of Governors (BBG). I
will highlight some of our recent oversight work, our continuing
initiatives, and the challenges we face in performing efficient and
effective oversight. I will also address the results and impact of our
work. At the outset, I would also like to thank this Subcommittee for
its interest in and support of OIG's work. In particular, I would like
to take this opportunity to thank Members of this Subcommittee for
sponsoring legislation intended to expand our hiring authority and our
ability to obtain information regarding misconduct by senior Department
personnel. This legislation is critical to our operation.
i. state oig's mission and oversight efforts
It is my honor to have led the State OIG for the last three years,
and I am pleased to have this chance to update you on the work we have
performed since I last testified before this Subcommittee in April
2015.
As I explained at that time, OIG's mandate is extensive and
requires us to oversee both Department and BBG programs and operations,
which include more than 70,000 employees and over 270 overseas missions
and domestic entities. These agencies are funded through combined
annual appropriations, fees, and other income of approximately $43
billion. Moreover, one important difference between State OIG and most
other OIGs is that we are statutorily required to periodically inspect
and audit every domestic and overseas operating unit around the world.
In recent reports, we have identified some of the top challenges
that the Department faces. Today, I will focus particularly on the
protection of people and facilities, the security of sensitive
information around the world, and the management of contracts and
grants. These three issues represent a significant part of the work
that we have done over the past eighteen months.
Protecting people and facilities
As testified previously, one of OIG's top priorities is protecting
those who work for the Department around the world. OIG has always
inspected physical security at overseas posts, but, since the September
2012 attacks on U.S. diplomatic facilities and personnel in Benghazi,
Libya, we are now expending additional resources on this critical
issue. In 2015 alone, personnel and property experienced attacks in
Bangladesh, Burundi, Canada, Central African Republic, Iraq, Mali, the
Philippines, South Korea, Timor-Leste, Turkey, and Yemen.\1\ These
incidents included grenade attacks at embassy residences, car bombs
detonated in front of consulate facilities, and the non-fatal stabbing
of the U.S. Ambassador to South Korea at an official event.
---------------------------------------------------------------------------
\1\ Department of State, Bureau of Diplomatic Security Year in
Review 2015 (June 2016).
---------------------------------------------------------------------------
Although the Department has continued to make improvements in
overseas safety and security over the past 18 months, challenges
remain. Through our inspection and audit work, OIG continues to find
deficiencies that put our people at risk. Given the sensitive nature of
OIG's work in this area, many of the reports related to safety and
security are classified, and my testimony today will be based solely on
information that is publicly available.
Health and safety concerns were a recurring theme in OIG's FY 2016
reports. Our work in these areas covered a wide range of risks. For
example, OIG found deficiencies in seismic risk mitigation in embassy
residences \2\ and a lack of occupational safety and health approvals
to ensure that hazards are addressed before overseas housing is
occupied.\3\ OIG also identified life, health, and safety risks to
building occupants due to hazardous spikes in electrical current in
both the office and apartment complexes at Embassy Kabul.\4\ In another
report, OIG identified inconsistencies in motor vehicle policies that
resulted in a lack of proper training for personnel serving in
countries with an elevated risk of car accidents and fatalities.\5\ The
Bureau of Overseas Buildings Operations (OBO) statistics show that of
the 773 armored vehicle mishaps that have occurred at overseas posts
within the last 5 years, 469 (about 60 percent) were deemed
preventable. Although the Department has acknowledged that driver
behavior contributes to vehicle fatalities and that solutions must
center on training, OIG recommended that the Department take additional
action to address the issue by establishing a mandatory training
requirement on armored vehicle safe-driving techniques for all overseas
professional chauffeurs and incidental drivers who operate such
vehicles.\6\
---------------------------------------------------------------------------
\2\ OIG, Inspection of Embassy Tashkent (ISP-I-16-12A, March 2016);
OIG, Inspection of Embassy Ashgabat (ISP-I-16-13A, March 2016).
\3\ OIG, Inspection of Embassy Kinshasa (ISP-I-16-19A, June 2016).
\4\ OIG, Management Alert: Hazardous Electrical Current in Office
and Residential Buildings Presents Life, Health, and Safety Risks at
U.S. Embassy Kabul, Afghanistan (MA-16-01, April 2016).
\5\ OIG, Inspection of Embassy Ashgabat (ISP-I-16-13A, March 2016).
\6\ OIG, Management Assistance Report: Armored Vehicle Training
(ISP-16-17, July 2016).
---------------------------------------------------------------------------
Another area of focus has been emergency action plans. These plans
and associated processes are important because planning and preparation
can make the difference between life and death in a crisis situation.
During FY 2016, OIG identified several issues with the Department's
emergency action planning and preparedness. For example, in a report
published in February 2016, OIG found that chiefs of mission were
unaware of the U.S. military assets available during emergency
situations.\7\ Without this information, embassies and consulates
cannot properly plan for emergencies and may be hindered in their
responses to actual crises. OIG also found that consular sections in
several posts that it inspected in 2016 were unfamiliar with their
roles and responsibilities leading up to and during a crisis.\8\ OIG
also found that emergency action plans were out of date, lacked key
information, included erroneous points of contact, or were improperly
certified by leadership.\9\ Without adequate staff training and a
properly documented and tested emergency action plan, embassies and
consulates cannot effectively mitigate the risks that a disaster or
unforeseen incident poses to its operations.
---------------------------------------------------------------------------
\7\ OIG, Inspection of Bureau of Diplomatic Security, Directorate
of International Programs (ISP-I-16-07, February 2016).
\8\ OIG, Inspection of Embassy Kinshasa (ISP-I-16-19A, June 2016);
OIG, Inspection of Embassy Cairo (ISP-I-16-15A, April 2016).
\9\ OIG, Inspection of Embassy Cairo (ISP-I-16-15A, April 2016);
OIG, Inspection of Embassy Kinshasa (ISP-I-16-19A, June 2016); OIG,
Inspection of Bureau of Energy Resources (ISP-I-16-06, February 2016).
---------------------------------------------------------------------------
Finally, maintaining sufficient physical security at overseas
facilities is an important aspect of protecting U.S. Government
employees. Physical security relates to physical measures--such as
locked doors, perimeter fences, and other barriers--to protect against
unauthorized access (including attackers or intruders) and to safeguard
personnel working in those facilities.\10\ In recent years, the
Department has developed new tools to identify and track physical
security deficiencies overseas; however, the Department needs to take
additional action. For example, OIG concluded in a December 2015 report
that, until the Department fully implements OIG's recommendations
intended to improve the process to request and prioritize physical
security needs, it will be unable to identify and address all physical
security-related deficiencies. Further, without taking such steps, the
Department will be unable to make informed funding decisions based on a
comprehensive list of physical security needs.\11\
---------------------------------------------------------------------------
\10\ OIG, Compliance Follow-up Audit of the Process to Request and
Prioritize Physical Security-Related Activities at Overseas Posts (AUD-
ACF-16-20, December 2015).
\11\ Ibid.
---------------------------------------------------------------------------
Conducting oversight to protect people and facilities is one of our
most important functions. Consequently, we will continue to coordinate
with the Department to bring security deficiencies and areas for
improvement to its attention and offer recommendations to address these
critical vulnerabilities. By conducting both our statutorily mandated
inspections and targeted audits and evaluations, OIG helps safeguard
the lives of people who work in or visit our posts abroad.
Information security and management
The Department depends on information systems and electronic data
to carry out essential functions that are critical to its mission. The
Department is entrusted with sensitive information, both classified and
unclassified. The security of these systems is vital to protecting
national and economic security, public safety, and the flow of
commerce.\12\ According to the Office of Management and Budget, the
Department has spent several billion dollars in the past 5 years on
software tools, IT equipment, and professional expertise. However,
given the complexity and sensitivity of the Department's IT apparatus
and the security breaches it has experienced, IT security and
management continues to be a significant management challenge.
---------------------------------------------------------------------------
\12\ OIG, Audit of the Department of State Information Security
Program (AUD-IT-16-16, November 2015).
---------------------------------------------------------------------------
In FY 2016, OIG reported significant weaknesses in the Department's
cybersecurity incident response and reporting program.\13\ The
Department's efforts to respond to incidents (including denial-of-
service, malicious code, and unauthorized access) showed that it had
not complied with its own information security policies in more than 55
percent of the incidents that OIG reviewed.
---------------------------------------------------------------------------
\13\ OIG, Management Assistance Report: Department of State
Incident Response and Reporting Program (AUD-IT-16-26, February 2016).
---------------------------------------------------------------------------
OIG also found network user account management to be another
cybersecurity vulnerability. In its management assistance report on the
Department's Active Directory (AD), OIG determined that 74 percent of
more than 2,500 inactive accounts were inactive for more than 1 year,
and the remaining accounts were inactive for greater than 90 days.\14\
This is a critical issue because, if an unneeded account remains
active, an intruder could gain access to sensitive information that
could compromise the integrity of the Department's network and cause
widespread damage across its IT infrastructure. This problem exists, in
part, because the Department does not have a centralized process for AD
account management. This issue is exacerbated by the fact that, as we
also reported, the Department's Chief Information Officer, the head of
the Bureau of Information Resource Management (IRM), is not properly
positioned within the organization to ensure that the Department's
information security program is effective.
---------------------------------------------------------------------------
\14\ OIG, Management Assistance Report: Inactive Accounts within
the Department of State's Active Directory (AUD-IT-16-37, June 2016).
---------------------------------------------------------------------------
As in prior years, OIG's annual assessment of the Department's
Information Security Program identified numerous control weaknesses
that significantly affected program effectiveness and increased the
Department's vulnerability to cyberattacks and threats.\15\ OIG has
reported that the Department lacks effective risk management for all
phases of the system development lifecycle.\16\ These problems persist.
For example, in the October 2015 inspection of IRM's Vendor Management
Office (VMO), OIG found that VMO did not consistently implement the
system that provides the framework for integrating IT project
schedules. This inconsistency led to inadequate bureau coordination,
incomplete project data, and limited visibility on projects,
activities, and risk.
---------------------------------------------------------------------------
\15\ OIG, Audit of the Department of State Information Security
Program (AUD-IT-16-16, November 2015).
\16\ OIG, Inspection of the Bureau of Information Resource
Management, Operations, Vendor Management Office (ISP- I-16-03, October
2015).
---------------------------------------------------------------------------
Finally, on a related point, the last time I testified before this
Subcommittee, I described OIG's vulnerable IT network as a major
challenge. Vulnerabilities in the Department's unclassified network
directly affected OIG's IT infrastructure, which was part of the same
network. I testified that the fact that the contents of our
unclassified network could be easily accessed and potentially
compromised placed our independence at unnecessary risk and did not
reflect best practices within the IG community. I am pleased to report
that OIG recently established its own independent IT network to
mitigate these risks.
Oversight of contracts and grants
OIG has focused on oversight of contracts and grants, an area where
the Department spends substantial resources. The Department's
obligations in FY 2016 included approximately $15.4 billion for
contracted services and $18.4 billion in grants and fixed charges.\17\
As it did the last time I testified, the Department faces continuing
challenges managing its contracts, grants, and cooperative agreements,
particularly as these vehicles become increasingly complex. The
Department needs to ensure that contractors and grantees are properly
selected, work is properly conducted and monitored, objectives of the
grant or contract are achieved, and costs are effectively contained. As
with ensuring the safety of its personnel, management of grants and
contracts is especially challenging in conflict areas, which present
unique obstacles to effective oversight.
---------------------------------------------------------------------------
\17\ USASpending, , accessed on November 21,
2016.
---------------------------------------------------------------------------
Although the Department has addressed some problems, weaknesses
continue to occur in other areas. In FY 2016, OIG issued several
management assistance reports addressing the Department's oversight of
contracts and grants, and OIG's Office of Investigations opened more
than 30 cases related to contract and procurement fraud.
During FY 2016, OIG identified issues with effective management of
high-value, critical contracts. In several reviews, inspectors and
auditors noted that routine contract management tasks, such as
validating performance metrics to assess contractor performance,
maintaining complete and accurate procurement files, conducting proper
invoice review, and modifying contracts, failed to comply with
Department guidance and Federal regulations.
Audits of contracts in Iraq revealed millions of dollars in
questioned and unsupported costs and unallowable fees. For example, an
audit of task orders awarded under the Operations and Maintenance
Support Services contract found that Department officials did not
prepare comprehensive planning documents, formally assign oversight
personnel, or ensure that oversight personnel adequately documented the
contractor's performance. As a result, the Department had no basis to
hold the contractor accountable for identified weak performance. In
addition, the Department did not comply with statutory and Department
requirements for timely agreement on contract terms, specifications,
and the price of the task orders, resulting in the contractor being
paid more than $500,000 in unallowable fees.\18\
---------------------------------------------------------------------------
\18\ OIG, Audit of Task Orders for the Union III Compound Awarded
Under the Operations and Maintenance Support Services (AUD-MERO-16-41,
July 2016).
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With regard to grants, OIG audits and inspections identified the
need for improved management and monitoring of grantees. For example,
in an audit of the Bureau of Political-Military Affairs (PM)
grantees,\19\ OIG reported that $2.8 million of $15.8 million in grant
expenditures were unsupported or unallowable, as defined by Federal
policies. OIG reported that these questioned costs occurred, in part,
because PM's grant monitoring process was not designed to prevent or
detect unallowable and unsupported costs. In particular, PM did not
independently verify that all award recipients had sufficient financial
management controls in place to prevent unsupported and unallowable
costs.
---------------------------------------------------------------------------
\19\ OIG, Audit of the Bureau of Political-Military Affairs Federal
Assistance Awards (AUD-SI-16-49, September 2016).
---------------------------------------------------------------------------
Finally, OIG's inspection of the Bureau of Democracy, Human Rights,
and Labor (DRL) programs in Iraq noted the challenges the Department
faces in managing grants in conflict areas. All 12 grants that were
active between October and November 2015 (with a total award value of
more than $42 million) had the necessary monitoring plans, performance
indicators, and risk assessment or contingency plans.\20\ However,
given security restrictions, neither DRL employees nor Embassy Baghdad
employees had conducted site visits to Iraq grant recipients since
2013. Instead, DRL relied on local contractors to visit grant recipient
sites.
---------------------------------------------------------------------------
\20\ OIG, Evaluation of Bureau of Democracy, Human Rights, and
Labor Iraq Programs in Support of Line of Effort 1 of the President's
Counter-ISIL Strategy (ISP-16-09, March 2016).
---------------------------------------------------------------------------
ii. continuing initiatives
Nineteen months ago, I described several new initiatives. These
initiatives are no longer ``new''; rather, they are an integral part of
our day-to-day work processes.
First, I earlier testified that OIG had begun making use of
management assistance reports and management alerts to bring specific
issues to the attention of Department and BBG management quickly and
without waiting for the conclusion of longer-term audits or
inspections. Since I last spoke with you, OIG has issued four
management alerts,\21\ which I personally sign, and twenty-five
management assistance reports.\22\ These reports are an important part
of our oversight efforts.
---------------------------------------------------------------------------
\21\ OIG, Management Alert: Hazardous Electrical Current in Office
and Residential Buildings Presents Life, Health, and Safety Risks at
U.S. Embassy Kabul, Afghanistan (MA-16-01, April 2016); OIG, Management
Alert: Evacuation of Embassy Tripoli (MA-15-02, July 2015); OIG,
Management Alert: Broadcasting Board of Governors Significant
Management Weaknesses (MA-15-01, May 2015); OIG, Management Alert:
Information Security in the Worldwide Refugee Admissions Processing
System (MA-17-03, December 2016).
\22\ See, e.g., OIG, Management Assistance Report: Mandatory
Disclosure Language in Department of State Grants and Assistance
Agreements (INV-15-02, December 2015); OIG, Management Assistance
Report: Contract Management--Lessons Learned From Embassy Kabul,
Afghanistan, Operations and Maintenance Contract (AUD-MERO-17-04,
October 2016).
---------------------------------------------------------------------------
Next, in April 2015, I discussed the role of the Office of
Evaluations and Special Projects (ESP), which was established in 2014.
I am pleased to report that ESP has issued nine reports and two
management alerts and continues to focus on systemic issues. In
addition, this office has continued to expand our efforts to meet the
requirements of the Whistleblower Protection Enhancement Act of 2012
and related statutes. In particular, the office's whistleblower
ombudsman has expanded our outreach and provided extensive information
to Department and BBG employees, grantees, and contractors. ESP also is
responsible for conducting investigations of allegations of
administrative misconduct, as well as retaliation, under the pilot
program for contractor and grantee employee whistleblowers and has
issued eight reports under this program.
Finally, our work in connection with overseas contingency
operations is now an established, well-integrated part of OIG's overall
work. I am the Associate Inspector General for the overseas contingency
operations in Afghanistan (Operation Freedom Sentinel) and Iraq
(Operation Inherent Resolve), and our staff is working closely with the
Department of Defense and USAID OIGs to oversee those operations. Since
I last spoke before this Subcommittee, I have appointed an assistant
inspector general who is responsible for overseeing the work of our OCO
staff.
Besides working with the other agencies with oversight
responsibility, this staff coordinates closely with OIG's offices of
audit and inspections to make the most effective and efficient use of
resources. To date, our major oversight efforts have focused on
auditing and evaluating bureaus and embassies that engage or support
counter-ISIL activities. We have also emphasized contract and grant
monitoring in contingency and high-threat environments. In addition, we
issued a ``Lessons Learned'' guide for program managers at the
Department of State operating in critical and high-threat environments.
During FY 2016, OIG issued 31 oversight products related to OCOs, and
we currently have more than 30 ongoing projects.
iii. challenges
Unlike other OIGs, my office is not always afforded the opportunity
to investigate allegations of criminal or serious administrative
misconduct by Department employees. Department components, including
the Bureau of Diplomatic Security (DS), are not required to notify OIG
of such allegations that come to their attention. For example, current
Department rules provide that certain allegations against chiefs of
mission shall be referred for investigation to OIG or DS. That guidance
further states that ``[in] exceptional circumstances, the Under
Secretary for Management may designate an individual or individuals to
conduct the investigation.'' \23\ Thus, DS or the Under Secretary may
initiate an investigation without notifying us or providing us with the
opportunity to evaluate the matter independently and become involved,
if appropriate.
---------------------------------------------------------------------------
\23\ Foreign Affairs Manual 4322.2.
---------------------------------------------------------------------------
Accordingly, OIG cannot undertake effective, independent
assessments and investigations of these matters as envisioned by the IG
Act.
We have been negotiating with the Department for at least two years
to address these limitations on our ability to conduct oversight, but
the problem persists. Although the Department has begun providing OIG
with some information, the process for doing so has not been
formalized, and the information is provided to us selectively. That
being said, I want to acknowledge and thank both Chairman Perdue and
Ranking Member Kaine for sponsoring legislation that would address this
limitation.\24\ Unfortunately, the need for a legislative fix remains.
I welcome your continued support as this Congress ends and the new
Congress begins next year.
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\24\ Improving Department of State Oversight Act of 2015, S.1527,
114th Congress (2015).
---------------------------------------------------------------------------
iv. impact
OIG embraces our mission to protect people and information,
although these efforts rarely result in a monetary return on
investment. At the same time, through our audits, evaluations,
inspections, and investigations, OIG returns real value to U.S.
taxpayers. Since my arrival three years ago, we have issued 317
reports, which included audits of annual financial statements,
procurement activities, and funds management. During this same period,
we identified more than $300 million in taxpayer funds that could be
put to better use and questioned costs.
Additionally, our criminal, civil, and administrative
investigations resulted in the imposition or identification of more
than $82 million in fines, restitution, recoveries, and other monetary
results.
OIG also provides important non-financial benefits. By helping the
Department improve its security, OIG's work helps safeguard the lives
of people who work in or visit our posts abroad. Success in this area
is not reflected in our financial statistics, but our security work is
a source of immense pride because its employees are, of course, the
Department's most valuable assets.
Our oversight provides other non-monetary benefits as well. These
include our health and safety work, our investigations that help ensure
that Department employees conduct themselves appropriately, and our
work to strengthen the integrity of the programs, operations, and
resources that are at the foundation of the Department's ability to
help preserve our national security. Indeed, the work of our talented
staff in reviewing security and leadership at our overseas and domestic
posts has significant and positive effects on the lives and well-being
of employees throughout the Department. That is what motivates our
employees, many of whom are on the road or serve overseas for extended
periods, sometimes at high-threat posts.
In conclusion, I want to thank Chairman Perdue, Ranking Member
Kaine, and the other members of the subcommittee here today for the
opportunity to testify. I also want to emphasize that OIG's
accomplishments are a credit to the talented and committed staff that I
have had the privilege to lead, and I also want to take this moment to
thank them for their hard work. I take my statutory requirement to keep
the Congress fully and currently informed seriously, and I appreciate
your interest in our work and for providing me the opportunity to
articulate the challenges faced by my office. I look forward to your
questions.
__________
Responses to Additional Questions for the Record Submitted
to Steve A. Linick by Senator Perdue
Question. Thank you again for your recent report on major
management and performance challenges for the State Department, and for
briefly outlining a few of the highlights in your testimony. Though we
discussed a few of these challenges and recommendations during the
hearing, please outline your top three issues in more detail.
Answer. The three most significant issues are protection of
personnel and property overseas, information security, and management
of grants and contracts.
With respect to protection of personnel and property, we have
focused particularly on physical security deficiencies and health and
safety matters. We have found that systemic issues in the Department of
State (Department) contribute to these concerns. In particular, we have
emphasized the Department's inability to track physical security
deficiencies and a lack of coordination between the Bureau of Overseas
Buildings Operations and the Bureau of Diplomatic Security.
With respect to information security, although the Department has
spent billions of dollars in this area, we have found a number of
recurring weaknesses. For example, the Department has not consistently
disabled inactive email accounts; it also has unreliable inventories of
systems that include personally identifiable information, ineffective
incident reporting, and duplicative IT investments. As a general
matter, these issues are associated with the lack of a holistic
management approach and the failure to adopt a risk management strategy
to identify, assess, respond to, and monitor risks. More specifically,
these particular technology issues are associated with the Department's
failure to position its Chief Information Officer to effectively
oversee implementation of information security programs.
Finally, with respect to management of contracts and grants, we
have also found persistent problems. In our reviews of contracting
issues, we have found incomplete files, a lack of invoice review,
acceptance of goods and services that do not meet standards, and
ineffective planning.
As to grants, we particularly see insufficient performance
monitoring and insufficient focus on sustainability. Like the other
challenges, these problems are connected to a lack of emphasis on
program management and accountability. These particular problems are
also caused by inadequate staffing and training, especially with
respect to oversight of complex, high-value contracts and grants.
We note that all three of these problems are amplified in overseas
contingency operations (OCO) and other conflict environments because of
the Department's heavy reliance on high-cost, contracted support; the
constant turnover of personnel in those locations; and unique oversight
difficulties caused by heightened safety and security concerns.
Question. Outside of your reports, what hindrances do you see to
better management and operations?
Answer. As a general matter, the Department needs to place more
emphasis on overall program management. In addition, the Department
needs to improve mechanisms for accountability. For example, as
described in my written testimony and in response to the previous
question, the Department's Chief Information Officer is not properly
positioned to ensure that the Department's information security program
is effective.
Question. Are there inherent cultural challenges that lead to
these management issues?
Answer. The Department's overall organization and assignment
processes are not structured to promote effective project management.
For example, many Foreign Service personnel are assigned management of
contracts and grants as a collateral duty and do not receive training
necessary for effective performance of their duties. In addition, most
Foreign Service employees rotate in and out of posts frequently, and
some assignments are as short as one year. As a result, many large
grants and contracts have multiple employees overseeing them, which
leads to a lack of both continuity and accountability.
Question. You have been in your post for about 3 years now. Could
you discuss in further detail how you have reformed your office since
being confirmed?
Answer. Internally, I have ensured that the office is focused on
our people-making sure that our personnel have a proper work
environment and appropriate systems to work effectively. For example,
as I testified, as of August 2016, OIG migrated to an independent IT
system that is separate from the Department's network. I have also
worked to improve our management systems, especially with respect to
supporting technology; quality assurance processes; and office culture.
In addition, I implemented leadership training beyond that required by
the Department, and we have provided ``360'' feedback for supervisors.
Externally, we are working to identify and address the highest
risks to the Department, while, at the same time, maintaining our own
independence and effectiveness. For example, we use management
assistance reports and management alerts to bring specific issues to
the Department's attention quickly, without waiting for the conclusion
of longer-term audits or inspections. We have also shifted to a risk-
based system for our inspections to ensure that we target our limited
resources for the greatest effect. Similarly, we have adopted a
strategic planning initiative to help us prioritize our work so that we
use our resources efficiently. Finally, we created the Office of
Evaluations and Special Projects in 2014 to address congressional
requests, special assignments, whistleblower claims, and administrative
misconduct.
In efforts closely tied to these external reforms, I have ensured
that our OCO oversight work is fully integrated into OIG's overall
mission. In particular, in collaboration with the inspectors general of
the Department of Defense and the U.S. Agency for International
Development, I have added personnel to fulfill our obligations under
the Lead Inspector General for Overseas Contingency Operations (LIG-
OCO) oversight structure required by 2013 amendments to the Inspector
General Act. Through these coordinated efforts, we provide LIG-OCO
oversight of Operation Inherent Resolve in Iraq and Syria and Operation
Freedom's Sentinel in Afghanistan.
Question. What challenges did you face in ensuring proper
oversight of your respective agencies, and how have you worked to
address those challenges?
Answer. We have faced two primary challenges in ensuring proper
oversight.
First, my office has not been consistently afforded the opportunity
to investigate allegations of criminal or serious administrative
misconduct by Department employees. This occurred because Department
components were not required to refer such allegations to OIG. This
issue was addressed through recent legislation sponsored by Chairman
Perdue and Ranking Member Kaine and signed by the President in December
2016.
Second, our own hiring authorities do not adequately address the
unique needs of this OIG and do not allow us to use some of the
individuals we hire most effectively.\1\ Specifically, our office is
required to inspect every embassy and post around the world and to
assess, among other issues, how our ambassadors and other senior
officials advance U.S. foreign policy goals. To accomplish this unique
mission, we rely heavily on retired Foreign Service annuitants who have
subject matter expertise necessary to conduct such inspections. In
practical terms, however, Foreign Service annuitants generally cannot
work more than 1,040 hours during each service year without incurring a
reduction in their annuities. This, in turn, limits OIG's ability to
adequately staff its inspections, train its Foreign Service annuitants,
and maintain continuity of operations.
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\1\ Until recently, we were also limited in our ability to hire
employees from the Special Inspector General for Iraq Reconstruction
(SIGIR), even though these individuals have unique expertise conducting
oversight in conflict zones, which is the subject of much of our work.
The Department of State Authorities Act, Fiscal Year 2017 addressed
this issue by granting competitive hiring status to certain SIGIR
employees. This language has already been beneficial.
Question. How can we help you improve your oversight? Are there
any reforms you are seeking that need a change in law to achieve?
Please include any that we may have discussed during the hearing as
well as any we did not have a chance to discuss.
Congress can amend the Foreign Service Act so that OIG itself has
the authority to waive a reduction in a retired Foreign Service
officer's annuity if OIG hires such an annuitant on a full-time basis.
(Currently, OIG must request such a waiver from the Secretary, who must
make certain determinations specified in the Act.) This would address
the limitations described in the response to question 2(a) above.\2\
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\2\ In addition, because OIG lacks the ability to enforce
compliance with its recommendations, it is helpful when Congress
addresses the need to implement particular recommendations through
legislation or similar action. See, e.g., H.R. Rep. 114-154, at 12-13
(2016) (recommending deferral of funding for the Bureau of Conflict and
Stabilization Operations ``until such time as the OIG confirms that the
Bureau has resolved all fundamental issues involving the Bureau's
mission, the extent of its overlap with other bureaus, and interagency
partners, and staff size and organization identified in both the OIG's
March 2014 inspection report of the Bureau and the subsequent
compliance follow-up review''); 161 Cong. Rec. H10413 (Dec. 17, 2015)
(statement of Rep. Rogers) (directing Secretary of State to submit a
report to the ``Committees on Appropriations describing the actions
taken by the Department to address the findings detailed in the Office
of Inspector General's Report ISP-1-15-35A'').
Question. In your testimony before this committee in one of our
first hearings last year, you brought to light some serious issues and
challenges the State Department Office of the Inspector General (OIG)
faces, preventing your office from being as effective as you'd like to
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be.
Can you provide a more in depth update on the issue of
independence of the State Department OIG and integrity of
investigations?
Answer. With respect to independence, in last year's testimony, I
described OIG's IT system as a major challenge. Previously, our network
was connected to the Department's systems, and vulnerabilities in the
Department's unclassified network directly affected us. In August 2016,
we migrated to our own IT system. This improves both our independence
and the integrity of our investigations by ensuring that Department
personnel cannot access our documents and materials.
With respect to integrity of investigations, as noted in response
to question 2(a), we have not consistently been able to oversee
misconduct cases effectively. This is because Department components
were not required to refer allegations of misconduct by senior
officials to OIG, an approach that was inconsistent with the practices
of other agencies and inspectors general. However, as also noted in
response to the previous question, legislation passed and signed by the
President in December 2016 addresses this important issue.
Question. During our hearing, we discussed some serious problems
with management weaknesses at the State Department pertaining to
keeping of all federal records--including personal emails--to meet both
Department policy and federal regulations.
Could you discuss some of the recommendations you've made
to the State Department on this front?
Answer. In our May 2016 report addressing email records management
and cybersecurity requirements, we made eight recommendations. Seven of
these recommendations are resolved but remain open. This means that the
Department has agreed with the recommendations but has not fully
implemented corrective action. Two notable resolved but open
recommendations are that the Department should: (1) continue to issue
periodic, regular notices reminding employees that use of personal
email accounts is discouraged and that these reminders should include
examples of the limited circumstances where such use is appropriate and
instruct employees how to preserve records when using personal email
accounts; and (2) develop an administrative penalty framework for
violations of the Department's guidance on recordkeeping and use of
authorized information systems. We also recommended that the Department
develop a quality assurance plan to identify and address
vulnerabilities in the records preservation process, including lack of
oversight and broad inaccessibility of electronic records. The quality
assurance plan was issued in December, and this recommendation has been
closed.
Do you think it would be wise for the next administration
to avoid the use of personal email accounts for official
business?
Answer. As we explained in our May 2016 report, Department guidance
that has been in place since 2014 discourages employees from using
personal email for official business except in ``very limited
circumstances when it becomes necessary to do so.'' The Department
further instructs employees that, in those limited circumstances,
messages covering official business sent from or received in a personal
account must be forwarded to the employee's official Department email
account so that they can be retained in accordance with the
Department's policies. Our report recommended that the Department
clarify and give specific examples of the types of limited
circumstances in which such use would be permissible.
Question. You also recently published findings and recommendations
on the State Department's classification policies and compliance with
Executive Order 13526, the executive order pertaining to the handling
of classified national security information. You found that most of the
State Department employees have not taken the training required by EO
13526 on how to handle classified information.
What are your priority findings and recommendations from
this report?
Answer. In addition to finding that employees had not taken
training, we found that the Department had not implemented the sanction
provision in the Executive Order that suspends an individual's
classification authority until training is completed. We recommended
that the Department develop and disseminate guidance explaining how
bureaus should monitor and enforce the mandatory classification
training requirements for Department employees. We also recommended
that the Department develop guidance explaining when contractors should
take the relevant course.
How should the new leadership at the State Department
prioritize this issue?
Answer. These recommendations are resolved but remain open, meaning
that the Department has agreed with the recommendation but has not
fully implemented corrective action. It will be important for new
leadership to ensure that all Department components follow through on
these recommendations and comply with the classification requirements
set forth in Executive Order 13526.
Question. We also discussed how to best address potential
conflicts of interest at the State Department going forward. As I
mentioned during the hearing, I am particularly concerned by the use of
the Special Government Employee (SGE) status, which allows these
employees to collect salaries from public and private entities that
operate in the same domain simultaneously. We have seen examples in the
press over the past year of how State employees were able to work at
organizations funded by governments receiving foreign aid from the
United States while maintaining their role at our own State Department.
While I know your office has not done any direct work on
this issue of conflict of interest and use of special
government employees at State to date, are there other
investigations currently ongoing on this issue that you are
aware of?
Did you consider conducting an investigation into
interactions between the Clinton Foundation and State
Department employees?
Answer. Our Office of Investigations handles matters involving
Department employees with alleged conflicts of interest, but I cannot
appropriately discuss whether we have contemplated or initiated any
particular investigation.
Question. You included in your testimony that the State Department
still has major shortcomings on implementing your recommendations
regarding physical security requirements, emergency planning, and
health and safety hazards. That seems like a very serious issue to me,
and yet it appears that many of the physical security issues are repeat
recommendations.
How receptive has State been to your recommendations on
physical security and keeping those serving at posts abroad
safe?
Answer. The Department has taken substantial steps to improve the
physical security of its employees and has accepted many of our
recommendations in this area. However, there are still weaknesses to be
addressed, and, over the years, many of the physical security issues
have led to repeat recommendations. To give one example, as I noted
during my testimony, we concluded that 40 percent of the
recommendations made by the Benghazi Accountability Review Board (ARB)
were repeat recommendations that spanned decades and multiple
administrations. Those recommendations had not been implemented because
of a lack of involvement by high-level Department leadership; instead,
many decisions were pushed down to the bureau level. To the
Department's credit, it recently amended the Foreign Affairs Manual to
ensure that responsibility for implementation of ARB recommendations
resides at the Deputy Secretary level. It will be important for new
leadership to ensure that the most senior officials in the Department
follow through on implementation of ARB recommendations and address
repeat recommendations.
OIG has also found that weaknesses in the Department's efforts to
address physical security are exacerbated by its failure to implement
critical recommendations issued in a March 2014 OIG report. In that
report, OIG recommended, among other things, that the Department
complete physical security surveys and construct a security deficiency
database, both of which are intended to improve the Department's
processes to request resolution of physical security needs and to
prioritize those needs. OIG concluded in a December 2015 compliance
follow-up report that, until the Department fully implements the March
2014 recommendations, it will be unable to identify and address all
physical security-related deficiencies. Further, without taking such
steps, the Department will be unable to make informed funding decisions
based on a comprehensive, prioritized list of physical security needs.
What barriers have been identified to implementing these
recommendations?
Answer. In March 2014, we issued recommendations to improve the
process to request funds for physical security. In response, the
Department has developed new tools, including a new physical security
survey instrument and a deficiencies database, to identify and track
physical security deficiencies. However, our December 2015 compliance
follow-up report found that the Department had not fully implemented
these tools. For example, only 143 physical surveys (covering about 10
percent of the Department's facilities) had been completed, and none
had been entered into the deficiencies database that the Department
established in April 2015. The Department reported that all surveys
would be completed and entered into the database by the end of fiscal
year 2016, in line with its 3-year reporting cycle. However, in
response to the follow-up report, the Department reported that, as of
September 30, 2016, it had completed only 50 percent of the required
physical security surveys within that reporting cycle. OIG has
requested that the Department provide the date it expects the remaining
surveys to be completed and the actions it has taken and will take to
ensure that all survey reports are completed as soon as possible.
Without a populated database, the Department cannot take action on two
other recommendations related to prioritizing all deficiencies and
developing and issuing a Long-Range Physical Security Plan.
Question. Last year, we discussed the issue of the five-year
inspection requirement for embassies.
Are you seeing any improvements in your ability to inspect
embassies closer to their required schedule?
Answer. The new risk-based model, tested in fiscal year 2016, is
being fully implemented this year. In fiscal year 2017, we expect to
shift resources to higher-risk inspections. As we work through
implementation of this new model, we hope to conduct our inspections
more quickly, efficiently, and effectively.
We expect that an inspection of a low-risk post may be 4-5 days
shorter than a medium- or high-risk post and conducted with a smaller
team. However, we plan to inspect only one or two low-risk posts per
cycle; the other posts will be medium- or high-risk posts or our large
missions. The risk model will allow us to re-direct resources--both
time and personnel--to those higher-risk posts that warrant increased
oversight. We also plan on conducting subject-specific inspections in
fiscal year 2017, which will focus on a single high-risk area (e.g.,
security) or program. Such inspections are not new, but we anticipate
making them a more routine part of the inspection schedule.
Do you have the resources you need to inspect all posts
overseas in addition to the rest of your very important
oversight mandate?
Answer. Use of a risk-based model will help us direct more
resources to higher-risk posts, but, even with that model, we continue
to lack the necessary resources to meet the mandated five-year
schedule.
Question. A common theme among both of your reports and
testimonies was the challenges we face in administering aid and
programs in non-permissive environments--places like Iraq, Syria, and
Afghanistan.
What challenges do you face? Do you have to rely on
partners to gain access to certain sites?
Answer. The challenges that we face in overseeing aid and programs
in non-permissive environments are similar to the challenges the
Department itself faces. Security issues in those areas make it
difficult, if not impossible, to travel and conduct oversight or
monitoring. OIG does not generally rely on non-governmental partners to
obtain access to those sites, but we sometimes require assistance from
U.S. Government law enforcement personnel, military personnel, and post
personnel or from host country partners. In addition, we sometimes
compensate for our inability to travel to particular locations by
meeting with grantees in third countries or by meeting with contractors
at an embassy. OIG has auditors and special agents on the ground in
Kabul, Islamabad, and Baghdad, in close proximity to contracting
officer representatives, contractors, and program managers.
Are you seeing greater access issues for investigation, as
well as greater oversight challenges at State, as our forces
draw down in Afghanistan?
Answer. Generally, in unstable areas with security concerns, it is
more difficult for us to conduct oversight work because our movement is
limited. This is an issue in Afghanistan, but it is not unique to
Afghanistan.
Question. You've highlighted in your testimony the challenge of
providing adequate oversight of contracts and grants overseas. In your
testimony, you state that while State has focused efforts on improving
management of contracts and grants, that the Department is still forced
to rely heavily on contractors and grantees, especially in conflict
areas, and that your office continues to find instances of insufficient
oversight. In particular, your office continues to find that State
partners fail to do risk assessment, especially in conflict areas.
As State and USAID continue to prioritize the local
ownership and involvement that comes with contracts and grants,
what recommendations do you have for them to improve the
design, management, and oversight of these programs?
Answer. As a general matter, we have identified oversight
deficiencies related to a lack of performance monitoring. In
particular, we have identified a lack of site visits, inadequate
internal controls, and over-reliance on easily measured ``outputs'' to
measure program success. We have also identified problems in ensuring
that these programs are sustainable in the long-term. Our
recommendations have focused on specific flaws (such as a lack of on-
site monitoring) as well as the need to improve performance
measurements and coordination with other entities, both inside and
outside the Department.
How receptive has State been to these recommendations?
Answer. The Department has made efforts to improve contracts and
grants monitoring, but we continue to identify deficiencies,
particularly with respect to program management. As noted previously,
some of these flaws relate to systemic issues within the Department,
namely, the lack of contracting and grant expertise, short rotations,
and a general lack of focus on accountability for grant and contract
oversight and performance.
Question. In your testimony, you state that your office was
particularly concerned with the absence of mitigating action plans for
high-risk areas concerning oversight of contractor operations, and that
this is an issue your office has raised repeatedly having issued four
reports in the last two years identifying these problems.
Can you give us a more detailed update on how State has
gone about implementing these recommendations?
Answer. Our September 2016 audit report\3\ specifically addressed
this issue. We recommended that the Department develop a process to
ensure that risk mitigation plans for each high-risk area identified in
a risk assessment has a specific mitigation action; we also recommended
that the Department develop controls to ensure that each risk
mitigation plan includes measurable milestones for implementation and a
process for monitoring, measuring, and documenting progress in
mitigating or reducing risk. The Department concurred with both
recommendations and stated that it is in the process of implementing
them. We will continue to monitor that implementation.
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\3\ Additional Actions Are Needed To Fully Comply with Section 846
Of The National Defense Authorization Act for Fiscal Year 2013
Concerning Critical Environment Contracting (AUD-MERO-16-50, Sept.
2016).
What's hindering State from implementing your repeated
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recommendations?
Answer. The issues that have hindered the Department's effective
oversight of contractor risk in high-risk areas relate to the same
issues noted previously. In particular, there is often insufficient
staffing; inadequate training, particularly for high-value contracts;
and little emphasis on program management and accountability.
How would you recommend changing the design of State's
management and oversight plan for these high risk areas?
Answer. Our recommendations regarding risk mitigation plans for
contractors operating in critical environments provided specific
recommendations to assist the Department in monitoring and measuring
risk mitigation.
Question. We discussed briefly GAO's report from July of this year
which highlighted the fact that of those implementers sampled, less
than half had not performed a risk assessment for fraud and loss in
Syrian assistance projects. This same report also discussed the finding
that U.S.-funded humanitarian assistance projects in Syria are prone to
more elevated risks than programs funded by other nations.
Given this information, and given that fraud and loss are
the two categories for which you have the highest numbers of
reported complaints, do you feel that a risk assessment for
fraud and loss should be a requirement for any implementer
distributing U.S. foreign aid? Why or why not?
Answer. Our primary recommendation with respect to foreign
assistance is that the Department establish a system to track and
manage that assistance. Risk assessments for fraud and loss may be
helpful, and we believe that consistent application of existing risk
assessment processes would improve outcomes. However, we also believe
that an important preliminary step is ensuring that the Department can
accurately identify the amount of taxpayer funds that are being
provided in foreign assistance. Without this basic information, the
Department cannot effectively coordinate with other agencies and
organizations, cannot provide accurate information to the Office of
Management and Budget, and cannot ensure that foreign assistance is
appropriately monitored and accounted for.
__________
Prepared Statement of Hon. Ann Calvaresi Barr
Chairman Perdue, Ranking Member Kaine, and members of the
subcommittee, thank you for inviting me to take part in this important
hearing to help inform the next administration and the incoming
Congress on the current challenges in providing U.S. foreign
assistance. As you know, since the U.S. Agency for International
Development (USAID) was established in 1961, successive Congresses and
administrations have consistently supported the United States'
continued leadership in international engagement, reinforcing financial
and security interests and building and strengthening ties around the
world.
As Inspector General, I am charged with leading the independent
oversight of up to $15 billion spent annually on foreign assistance
provided through USAID, the Millennium Challenge Corporation (MCC),\1\
the U.S. African Development Foundation (USADF),\3\ the Inter-American
Foundation (IAF),\3\ and the Overseas Private Investment Corporation
(OPIC).\4\ Today, I will focus on USAID and the major management
challenges the Agency faces in carrying out its mission. I will also
highlight OIG's numerous initiatives and reforms for advancing my
vision for a high-performing organization--one that provides
comprehensive, timely, and risk-based assessments of USAID programs and
operations, and keeps Congress informed of our work on USAID and the
other foreign assistance entities we oversee.
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\1\ Created in 2004, MCC competitively selects countries that
demonstrate commitment to good governance, economic freedom, and
investment in citizens, and provides them with large-scale grants to
fund projects that promote sustainable economic growth, open markets,
and improved living standards.
\2\ Created in 1980, USADF provides small development grants to
underserved and marginalized populations in conflict and post-conflict
areas in Africa.
\3\ Created in 1969, IAF provides small development grants directly
to grassroots and nongovernment organizations in Latin America and the
Caribbean.
\4\ Created in 1971 as the U.S. Government's development finance
institution, OPIC mobilizes private capital to help solve critical
development challenges abroad.
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summary
The complex and frequently inhospitable environments USAID works in
create major challenges for the Agency in carrying out its mission.
Among these challenges, we identified five that need particular
attention in fiscal year 2017. These challenges stem largely from the
complexities in coordinating and implementing foreign assistance
efforts jointly with multiple and diverse stakeholders; a lack of local
capacity and qualified personnel to execute USAID-funded projects; and
weak project design, monitoring, and internal controls. Weaknesses in
these areas limit the impact of USAID projects or derail them before
they began; leave programs vulnerable to fraud, waste, and abuse; or
both. The magnitude of our investigations related to humanitarian
assistance programs in Syria demonstrate the extent to which USAID
programs can be vulnerable to exploitation. Our investigations exposed
fraud schemes involving collusion between vendors and implementers,
product substitution, inflated billing, and false claims. While USAID
has suspended several implementing partner programs, vendors, and
individuals, these abuses raise serious concerns about implementers'
contracting processes and USAID's oversight of them.
To provide the level of oversight needed to help USAID address
these complex challenges, OIG has capitalized on opportunities I
identified to improve our operations--with independence as our
grounding principle. Since I was sworn in a year ago, OIG has
significantly advanced my vision for a high-performing organization.
That vision begins with how we scope and execute our work. In addition
to auditing and investigating individual USAID programs and projects,
we are now targeting weaknesses that cut across USAID and the other
entities we oversee in areas such as human capital management and
training; vetting implementers of USAID programs; coordination among U.
S. Government agencies; and efforts to strengthen financial and
information technology management. This crosscutting work will provide
solutions that link headquarters-based strategies to field-level
implementation. To better position my staff to carry out this work, I
have launched a number of initiatives, some of which have already been
completed.
First, I added more rigor to how we prioritize our work and
coordinate with oversight partners. Our new audit and
investigation plans assess risk, follow high-dollar
initiatives, and account for stakeholders' informational and
decision-making needs, while providing the flexibility to pivot
to emerging oversight needs.
Second, I called for multidiscipline teams comprising audit
and investigations staff from headquarters and the field, as
well as technical experts such as methodologists, writers, and
information technology specialists. To provide for controlled
engagement of these cross-cutting teams, I consolidated 11
overseas offices to 4 hub offices, with heads of audit,
investigation, and management involved in every aspect of their
units.
Third, I have taken steps to revitalize our workforce.
Notably, I recruited new leaders to strengthen OIG's executive
team, elevated performance standards, and commissioned a review
to identify the training and resources staff need to succeed.
To help ensure these steps take root, I am holding OIG
executives, managers, and supervisors accountable for workplace
inclusivity and excellence.
Finally, I have taken action to solidify our independence.
Within weeks after my confirmation, I established a cooperation
memorandum with the USAID Administrator to formalize OIG's
authority, and we are working to take back responsibility for
assessing actions taken to address our recommendations. We
continue to develop and implement major reforms, including
revisiting audit and investigation policies and procedures, to
provide reliable and meaningful oversight, while being good
stewards of taxpayer dollars.
background
With the passage of the Foreign Assistance Act and the
establishment of USAID 55 years ago, the United States solidified its
bipartisan commitment to address basic human needs and advance the
rights of the world's most disenfranchised people, and thereby
encourage adoption of our Nation's core values.\5\ While U.S. foreign
assistance remains rooted in humanitarianism, it has evolved over the
decades to emphasize development, economic stability, and
sustainability. Today, professionals work around the world to help
promote democracy and free markets, while aiding individuals and
nations struggling to recover from natural disasters and health crises,
rebuild after years of conflict and war, and achieve freedom and
dignity.
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\5\ Public Law 87-195, September 1961.
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USAID is the principal U.S. agency for providing development
assistance to countries around the world: USAID programs aim to support
economic growth, combat the spread of disease, promote democratic
reform, and address food insecurity. The agency also provides
assistance to countries working to alleviate poverty, and recovering
from disaster or periods of conflict. USAID undertakes development and
humanitarian assistance activities to expand stable, free societies and
create markets and trade partners for the United States. Headquartered
in Washington, D.C., with missions around the world, USAID works with
private voluntary organizations, indigenous organizations,
universities, the private sector, international agencies, foreign
governments, and other U.S. Government agencies.
My office provides independent oversight of USAID operations and
programs, as well those of MCC, USADF, IAF, and OPIC. With an amendment
to the Inspector General Act in 2013, my OIG also provides joint
oversight of overseas contingency operations. Currently, we partner
with the Departments of State and Defense OIGs on Operation Inherent
Resolve (OIR), the operation dedicated to countering the terrorist
threat posed by the Islamic State of Iraq and the Levant in Iraq,
Syria, and the surrounding region.
We currently have 275 staff working at headquarters in Washington,
D.C., and throughout the world. Our fiscal year 2016 base appropriation
was $66 million.\6\
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\6\ In addition to base appropriations, OIG draws on other sources
of funding, which include supplemental appropriations, prior year
balances, and reimbursements from the agencies we oversee to fully
support our work.
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top management challenges usaid confronts in
implementing its programs and operations
USAID frequently works in environments affected by conflict or
civil unrest, natural disasters, or disease. These inhospitable
environments create major challenges, including protecting overseas
agency personnel and accessing project locales for monitoring. Local
laws and restrictions, political repression, corruption, and travel
constraints create additional challenges, including coordinating and
communicating with implementing partners and other stakeholders to
formulate and execute projects.
Given the dollars and programs that are at stake, our office
provides continued oversight of USAID and other U.S. foreign assistance
operations to identify opportunities and make recommendations for
improvement. As required by law, we report each November on the top
management challenges facing the agencies we oversee.\7\ USAID has
taken many actions to respond to our recommendations, as well as other
constructive actions to achieve its mission. However, we identified
five top management challenges for USAID in fiscal year 2017. These
challenges stem largely from the complexities in coordinating and
implementing foreign assistance efforts jointly with multiple and
diverse stakeholders; a lack of local capacity and qualified personnel
to execute USAID-funded projects; and weak project design, monitoring,
and internal controls.
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\7\ Reports Consolidation Act of 2000, Public Law 106-531.
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Developing strategies to work effectively in nonpermissive and
contingency environments
USAID acknowledges that working in nonpermissive and overseas
contingency environments-- environments characterized by conflict,
government instability, or cataclysmic natural events--is one of its
longest-standing operational challenges. Challenges include finding
qualified contractors and grantees willing to work in dangerous
environments, protecting overseas agency personnel, and gaining access
to project locales for appropriate monitoring.
USAID's Office of Transition Initiatives notes that the ``nature of
these environments requires flexible responses and iterative processes
adapted to specific country contexts.'' \8\ For example, to compensate
for the drawdown of U.S. Armed Forces and reductions in USAID staff in
Afghanistan, USAID planned to use multitiered monitoring to leverage
data and observations from U.S. and Afghan Government sources, other
donors, USAID partners, beneficiaries, and contractors hired to monitor
activities. However, as we reported in December 2015, USAID/Afghanistan
could only demonstrate that 1 of the 127 awards made between January
2013 and September 2014 used multitiered monitoring.\9\ The mission's
limited use of multitiered monitoring was largely due to insufficient
guidance and monitoring plans, as well as a lack of systems for
collecting and using data.
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\8\ Office of Transition Initiatives, ``Lessons Learned: Monitoring
and Evaluation in Complex, High-Threat Environments,'' April 2010.
\9\ ``Audit of USAID/Afghanistan's Strategy for Monitoring and
Evaluating Programs Throughout Afghanistan,'' Report No. F-30616-001-P,
December 10, 2015.
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Moreover, relying on ad hoc approaches to design, implement, and
monitor programs in environments designated as nonpermissive can leave
programs vulnerable to fraud, waste, and abuse. For example, in
Afghanistan, we found cases of contract steering, contractor
overbilling and overcharging, bribe solicitation, fraudulent hiring
practices by contractors, and embezzlement by a contractor employee.
Our investigations in Nigeria similarly demonstrate program risks in
nonpermissive environments. One investigation and subsequent OIG audit
determined that more than a third of a $17 million award for an AIDS-
related health-care program was diverted for personal use or
misdirected from the project. The magnitude of our investigations
related to humanitarian assistance programs in Syria provide a case
study of the extent to which USAID programs can be vulnerable to
exploitation. As we testified in July, our investigations exposed fraud
schemes involving collusion between vendors and implementers'
procurement and logistics staff.\10\ We also identified product
substitution schemes (food and nonfood items), inflated billing, and
false claims. While USAID has suspended several implementing partner
programs, vendors, and individuals, these abuses raise serious concerns
about implementers' contracting processes, including using less than
full and open competition; the rigor and timeliness of their responses
to allegations of fraud; and their logistics, quality control, and
monitoring procedures. They also raise questions about USAID's
oversight of implementers and their progress.
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\10\ Statement before the Committee on Foreign Affairs Subcommittee
on the Middle East and North Africa, United States House of
Representatives, ``Fraud Investigations Expose Weaknesses in Syria
Humanitarian Aid Programs,'' July 14, 2016.
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To help USAID and its implementing partners combat fraud in
nonpermissive environments, our Office of Investigations developed a
quick reference guide that covers internal control deficiencies, fraud
indicators, and best practices for preventing fraud. The guide was
designed for the Middle East humanitarian response but is useful for
USAID programs in other regions. While the guide has already proven to
be an effective tool, assuring stakeholders that programs are not
susceptible to fraud and waste will remain a challenge for USAID until
oversight gaps have been identified and closed.
Strengthening local capacity and sustainability while ensuring adequate
oversight of USAID funds
To better ensure local partners can sustain USAID-supported
development projects, the Agency calls for investing in communities
that have a stake in continuing activities and services after USAID
involvement ends, building the skills of local stakeholders, and
ensuring public- or private-sector participation and financial backing.
While sustainability has been a precept of development programs since
the enactment of the Foreign Assistance Act in 1961, the ability of
some host countries to sustain USAID programs remains uncertain.
Consider the following examples:
As we reported in 2016, 5 of 19 USAID-funded road
construction projects in the West Bank show signs of
deterioration. A mission-commissioned study found that due to
competing budget priorities, the Palestinian Authority did not
allocate funds from fuel-tax revenue to support road
maintenance. Consequently, USAID-funded road projects will not
be fully sustainable until the authority dedicates tax revenue
to maintain these critical civic resources.
Under the terms of its contract with USAID, Haiti's health
ministry was expected to assume some costs for a health
services project. However, the project lacked a plan to
transfer responsibility for paying health worker salaries at 80
health-care facilities from USAID to other sources after the
project ends. Contractor officials assumed that because the
Haitian Government could not pay the salaries, USAID or other
donors would continue to pay them.
USAID's Local Solutions initiative, a reform strategy under USAID
Forward, has not always met expectations.\11\ The Local Solutions
initiative aims to promote country ownership and sustainability of
development outcomes by providing program funding directly to partner
governments and local organizations. However, securing host country
commitment to sustain USAID's investment, vetting local capacity to
manage funds in accordance with U.S. regulations, and planning and
monitoring have presented major challenges in missions' implementation
of the initiative. Take the following examples:
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\11\ In 2010, USAID launched USAID Forward, a series of reforms to
focus on results, promote sustainable development, and scale up
innovative solutions.
USAID/Paraguay implemented a program through a local
organization to strengthen the internal management and
government systems of select public institutions. However, the
mission failed to ascertain in its preaward survey that the
organization lacked sufficient financial and managerial
capacity to manage USAID funds, assess results, or track
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program progress--ultimately putting $24.4 million at risk.
Our investigations of local implementers revealed risks
consistent with our audit findings. Most of the cases we
surveyed involved allegations of inappropriate or fraudulent
actions taken by senior or key staff, pointing to a propensity
for weak corporate governance. We also found that local
implementers typically failed to self-disclose fraud to the
Agency or OIG.
The U.S. Government Accountability Office (GAO) pointed out that
USAID relied primarily on a single indicator--funds obligated--to
measure Local Solutions' progress, not what these investments
yielded.\12\ Without more robust indicators, such as risk assessments
and program monitoring, GAO found that USAID cannot determine the
status of activities prior to and following the obligation of funds.
Further, while USAID has laid some groundwork for evaluating the Local
Solutions initiative, the Agency has not demonstrated it has the means
to determine the extent to which missions are conducting performance
evaluations to assess the effectiveness of programs implemented through
local organizations.
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\12\ U.S. Government Accountability Office, FOREIGN AID: USAID Has
Increased Funding to Partner-Country Organizations but Could Better
Track Progress (GAO-14-355), April 16, 2014.
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Reconciling interagency priorities to advance international development
In carrying out contingency and other operations that require
coordination with multiple U.S. Government agencies, USAID employees
are sometimes unclear as to how to balance USAID's development
priorities with other agencies' priorities and to manage additional
layers of review.
This was the case with the implementation of the Enhanced
Partnership with Pakistan Act (EPPA) of 2009, which authorized $7.5
billion over 5 years for civilian assistance. The State Department has
the lead role in assistance activities in Pakistan, giving it
responsibility for budget and project decisions.\13\ As we reported in
September 2016, USAID/Pakistan has struggled to reconcile its long-term
development objectives with State's diplomatic aims. At the outset,
USAID/Pakistan followed State's strategy, which lacked long-term
development goals. In 2013, the mission implemented a formal strategy
that linked activities to a long-term development goal but lacked
indicators to measure progress. The strategy also focused on repairing
and upgrading Pakistan's energy infrastructure--mirroring State's focus
on energy as key to long-term growth--but not on other priority areas,
such as health, education, and economic growth.
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\13\ Department of State, ``2010 Quadrennial Diplomacy and
Development Review: Leading Through Civilian Power.''
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The difficulties USAID and State have confronted in implementing
EPPA revealed a trend. For a previous audit of USAID and State's
response to the protest movements across the Middle East, known as the
Arab Spring, we surveyed 70 USAID employees working on programs in
Egypt, Tunisia, Libya, and Yemen to identify the challenges they faced.
According to surveyed staff, the State Department's increased influence
over USAID programs after the Arab Spring added a layer of review that
slowed operations and strained USAID resources, as employees had to
dedicate additional time to building consensus and gaining external
parties' approval.
As a result of our EPPA audit, we recommended that USAID institute
an interagency forum to better ensure its development goals are taken
into account in countries where State takes the lead. In response,
USAID's Administrator has engaged State Department leadership to
discuss solutions, including better reconciling any conflicting
interests at the beginning of planning and programming, to help USAID
and State pursue their respective objectives simultaneously. We also
recommended that USAID formalize its policy to clearly define its roles
and responsibilities for designing and implementing development
programs when it is subject to State Department control in critical
priority countries.
Improving program design and contractor and grantee monitoring
Poor design can limit the impact of USAID projects or derailed them
before they begin. For example, contract flaws, such as a lack of clear
deliverables, complicated the implementation of an $88 million
agricultural program in Haiti. In addition, a procurement design issue
resulted in a lengthy award approval process and difficulties in
implementing emergency programs to address food shortages caused by
quarantines, border closures, and a depleted farm workforce delayed
USAID's Ebola response in Guinea, Liberia, and Sierra Leone-- the
countries most affected by the outbreak in West Africa. In both cases,
insufficient or inexperienced staff contributed to the programs' poor
designs.
Performance monitoring of contractors and grantees has been
undermined by persistent weaknesses in collected and reported data. For
example, in September 2016, we reported that our prior audits of USAID
missions in Egypt, Jordan, and West Bank and Gaza between fiscal years
2011 and 2013 consistently found instances of unreliable data. We also
reported that these missions did not adequately develop or use internal
controls--policies, procedures, systems, or other tools--to ensure
quality data, monitoring, and evaluation. The weaknesses stemmed from
staffing shortages, lack of employee training, and managers' lack of
enforcement, as well as from frequently shifting budgets and
priorities.
Our audit and investigation work also points to a need for USAID to
provide more rigorous monitoring to identify contractors and grantees
who take advantage of weak internal controls to commit fraud, waste, or
abuse. For example, our investigations uncovered fraud in two USAID
health programs. In one case, a West African was charged with
defrauding a USAID-supported antimalaria program of more than $12
million in funds intended for insecticide-treated nets. To curb such
fraud, our office set up malaria hotline campaigns in three countries,
which have led to joint operations with the host nations' law
enforcement and seizures, arrests, and prosecutions. In the second
case, a USAID employee shared sensitive procurement information with a
favored candidate for a $55 million cooperative agreement. As a result
of our investigation, USAID stopped the procurement process that
prevented the agreement from being improperly awarded.
Meeting governmentwide financial and information management
requirements
Longstanding internal control weaknesses have limited USAID's
ability to meet some of the Federal Government's financial management
requirements--established to better ensure agencies are effective
stewards of Government resources. Some reported weaknesses relate to
reconciling transactions between USAID and other Federal agencies--
which are typically recorded in different accounting periods or use
different methodologies. Treasury reported that as of September 30,
2016, USAID had more than $3 billion in unreconciled transactions with
other agencies. Although USAID has increased its efforts and
continually researches intragovernmental activity to resolve
unreconciled amounts, differences persist. Reconciling differences
between USAID's Fund Balance with Treasury account and the Department
of Treasury's records has also been problematic. As of September 30,
2016, the net difference between USAID's general ledger and the amount
in Treasury's records was approximately $195 million-- $141 million of
which cannot be explained.
USAID has taken great strides in implementing the complex
requirements of the Federal Information Security Modernization Act of
2014 (FISMA) and removing significant deficiencies.\14\ However,
concerns remain. Notably, the USAID chief information officer (CIO)
reported to the assistant administrator for the Bureau of Management--
not directly to the agency Administrator or Deputy Administrator, as
required. As a result, the CIO may have limited authority in ensuring
information technology projects and actions are funded, tracked, and
prioritized at a level commensurate with the direction and goals of the
Agency as a whole. In addition, USAID did not maintain the appropriate
segregation of duties. Specifically, one staff member carries out the
roles of both the deputy CIO and the chief information security
officer. As a result, the individual not only performs security control
activities but reviews those activities for compliance with FISMA,
calling into question the independence of USAID's FISMA compliance
reviews.
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\14\ The Federal Information Security Modernization Act of 2014
(Public Law No. 113-283) updated and largely supersedes the Federal
Information Security Management Act of 2002 (Public Law No. 107-347,
Title III) but retains many of the requirements for Federal agencies'
information security programs previously set by the 2002 law.
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Finally, USAID's classification policy does not meet Federal
requirements for establishing a uniform system for classifying,
safeguarding, and declassifying national security information.\15\ We
found systemic noncompliance related to security education and
training, classification markings and guidance, and reporting of
program activities and results.
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\15\ Executive Order 13526 (2009).
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oig reforms and initiatives for achieving greater impact
OIG's portfolio of work helps ensure USAID and the other entities
we oversee not only meet their mission objectives but achieve the
highest return on taxpayer investment--a standard our office continues
to model. For every dollar we spent in fiscal year 2016, we identified
more than 3 dollars in questioned costs, funds put to better use, and
investigative savings and recoveries. While I am proud of these
accomplishments, we can improve our operations to achieve greater
returns on investment, have a more profound impact on agency outcomes,
and keep Congress and other stakeholders fully informed.
Since I was sworn in as Inspector General a year ago, I have taken
a comprehensive and critical look at our operations and identified
opportunities to improve how we work--with independence as our
grounding principle. In just 1 year, OIG has significantly advanced my
vision for a high-performing organization.
That vision begins with how we scope and execute our work. While
auditing and investigating individual USAID programs and projects
around the world can yield findings that demand action and help
individual missions improve their operations, this approach does not
always get at the systemic causes of the problems we uncover.
Therefore, we are targeting our work to identify weaknesses that cut
across USAID, MCC, USADF, IAF, and OPIC in areas such as human capital
management and training and vetting implementers of USAID programs;
coordination among implementers; and efforts to strengthen financial
and information technology management. By looking across programs and
projects and all the agencies we oversee, our work will have greater
impact at the agency level and provide solutions that link
headquarters-based strategies to field-level implementation.
A number of completed and ongoing initiatives that I have launched
will better position OIG staff to carry out this oversight. First, we
have added more rigor to how we prioritize our work and coordinate with
oversight partners. Our new audit and investigation plans assess risk,
follow high-dollar and crosscutting initiatives, and account for
stakeholders' informational and decision-making needs. For example, our
ongoing audit of the Power Africa program will determine whether
projects in this complex program--which requires extensive coordination
among USAID, MCC, OPIC, USADF, and other Federal components; multiple
African governments; and private industry--are on track to achieve the
program's goal to greatly expand access to electricity in sub-Saharan
Africa by providing at least 60 million new households and businesses
with on- and off-grid power solutions.
At the same time, our plans provide the flexibility to pivot to
emerging oversight needs. Our global health work provides examples.
Notably, we have identified lessons learned from USAID's response to
the Ebola outbreak to help inform and readily assess USAID's
preparedness to respond to future public health emergencies, such as
the Zika virus in Central and South America. Similarly, to provide
comprehensive oversight of USAID's recent award of a $9.5 billion
global health supply chain program for purchasing and distributing
life-saving medicine and health supplies, we continued our ``Make a
Difference'' campaign, establishing confidential hotlines for reporting
fraud; joined an interagency Malaria Drug Theft Task Force; and
conducted targeted outreach.\16\ These initiatives have yielded
significant results. For example, our investigations led to the seizure
of stolen USAID-funded antimalarial medications from 8 of the 17
locations in Malawi that were searched, and the arrest, conviction, and
sentencing of 6 individuals. Our investigations work has also brought
to light vulnerabilities in the security of other supplies, including
HIV/AIDS test kits.
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\16\ Our agents have provided fraud awareness training to 142 prime
implementer and subcontractor staff in Washington, D.C., and
approximately 160 procurement and supply management project staff in
Nigeria, and conducted risk analysis meetings, addressing
vulnerabilities in financial and operational accountability, with USAID
and the prime implementer.
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Joint oversight of initiatives such as OIR also demands upfront
planning and ongoing coordination. Therefore, in stepping up our
scrutiny of OIR and other initiatives that involve multiple agencies,
we continue to expand collaborative efforts with our oversight
partners. Over a third of one USAID office's implementers responding to
the Syria crisis also receive State Department funding,\17\ so we are
working with State OIG to provide fraud awareness briefings to
implementers\18\ and are currently conducting three joint
investigations. We are also collaborating with our oversight
counterparts at other bilateral donors and public international
organizations through the Syria Investigations Working Group, which OIG
stood up in October 2015. Programmatic and budgetary overlaps of USAID,
U.N. agencies, and public international organizations are associated
with potential vulnerabilities and are investigative interests. Public
international organizations, such as the United Nations World Food
Programme, collectively receive about 40 percent of USAID's budget for
the humanitarian response in Syria. To date, we have sent 32 referrals
to group members and foreign law enforcement offices.
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\17\ USAID Office of Foreign Disaster Assistance.
\18\ USAID OIG and State OIG have provided 5 joint fraud awareness
presentations to 83 implementer staff in Jordan to help combat fraud in
Syria.
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Second, OIG teams now include staff from across our organization to
facilitate and encourage coordination between audit and investigation
as well as headquarters and the field. To support these cross-cutting
teams, I reorganized our office, consolidating 11 largely independent
overseas offices to 4 strategically located hub offices,\19\ which
allows for controlled engagement, with heads of audit, investigation,
and management involved in every aspect of their units. I also
realigned our management structure to enable us to better target our
oversight on foreign assistance activities susceptible to fraud, waste,
and abuse, and on programs and functions that present the most
challenges to plan and implement. For example, our investigations
raised questions about USAID's oversight of funds provided to public
international organizations, prompting us to conduct an audit looking
at how USAID assesses risks prior to award, mitigates any risks during
implementation, and monitors public international organization
programs. The realignment also builds in inclusivity and employee
engagement in decision making and obtain buy in.
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\19\ Central/South America, Eastern Europe/Middle East, Asia, and
Africa.
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Third, I have instituted a number of actions to revitalize our
greatest asset--human capital. Within the first few months of my tenure
as Inspector General, I recruited new leaders to strengthen OIG's
executive team and established high standards for myself and our
leaders, providing them the training and tools they need to succeed,
including 360 feedback and coaching. To make the most of our investment
in employee development, we started a top-down review of staff skill
levels and capabilities. OIG is also elevating performance standards
across the board and holding OIG executives, managers, and supervisors
accountable for workplace inclusivity, civility, and improved
performance. These measures have paid quick dividends, as our leaders
and front-line staff have already proven that they have the capacity
and drive to meet the standards. Ensuring our staff receive fair and
reasonable compensation for their work is also paramount. To that end,
I am seeking to align our system of pay for Foreign Service
investigators with that of the rest of the Federal law enforcement
community to provide for a level playing field in recruiting and
retaining these dedicated professionals.
I am also standing up a Quality Assurance Team to continuously
monitor the execution of our work and ensure it and our corresponding
policies and procedures meet the highest standards set by law and
regulations, the accountability community, and our office. To further
build quality into our work, I hired a communication manager to
establish a writing team that fully participates in audit engagements,
bringing unique critical thinking skills in developing high-impact
reports; a training director to improve employee development processes;
and a business process engineer to analyze and revise as needed our
policies, processes, and procedures. We have already begun to institute
new streamlined processes for developing more robust and responsive
audit reports and cleared a backlog of our investigative cases.
Finally, our work and the processes we employ must be completely
independent. Within weeks after my confirmation, I established a
cooperation memorandum with the USAID Administrator to formalize OIG's
authority to have full access to the documentation and people our
auditors and investigators need to carry out our mission. To further
solidify our independence, we have plans under way to reverse a
longstanding practice and take back responsibility for assessing
actions taken to address our recommendations and determining whether
these actions are timely and meet our intent. I am also seeking
clarification regarding our audit authority over OPIC. Because OIG does
not have full authority to oversee OPIC programs and operations, we
currently conduct audit and other activities under an annual agreement
that has been subject to negotiation, limitations, and delays. This
middle ground is untenable. Therefore, we are looking to engage with
Congress and other stakeholders to find a more permanent solution that
aligns with the Inspector General Act.
Our ongoing and planned audits and investigations will help USAID
address the challenges we identified and link the Agency's strategic
goals with their tactical implementation. During fiscal year 2017, we
will continue to develop and implement major reforms to ensure our
dedicated workforce at headquarters and around the world have the
policies, processes, training, technologies, and other tools needed to
provide reliable and meaningful oversight and, more importantly, to be
good stewards of taxpayer dollars. I am confident that we will enter
the next fiscal year in a position to make these reforms standard
business practices that will last for years to come.
I am as passionate about our oversight role today as I was when I
first began working in the accountability community 3 decades ago. I
remain committed to ensuring that USAID and the other foreign
assistance entities we oversee prudently use every dollar they get.
Given the environment and risk that foreign assistance programs work
in, this is no easy task, but it makes our work--along with this
Subcommittee's oversight and commitment--even more compelling and
needed to ensure we get it right.
This concludes my prepared statement. I will be happy to answer any
questions you may have for me at this time.
__________
Responses to Additional Questions for the Record Submitted
to Ann Calvaresi Barr by Senator Perdue
Question. Thank you again for your recent report on major
management and performance challenges for USAID, and for briefly
outlining a few of the highlights in your testimony. Though we
discussed a few of these challenges and recommendations during the
hearing, please outline your top three issues in more detail.
Outside of your reports, what hindrances do you see to
better management and operations?
Are there inherent cultural challenges that lead to these
management issues? What will the incoming administration need
to be aware of/take on in that regard?
Answer. Our November 15, 2016, report identified five top
management challenges for USAID.\1\ Foremost among these are (1)
improving program design and contractor and grantee monitoring; (2)
strengthening local capacity and sustainability while ensuring adequate
oversight of USAID funds, and (3) reconciling interagency priorities to
advance international development. These challenges are exacerbated by
nonpermissive environments and lack of effective information technology
and financial management systems.
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\1\ Statement on Top Management Challenges for USAID and MCC Fiscal
Year 2017 (Nov. 15, 2016).
Sound design, monitoring, and evaluation are critical to the
successful implementation of foreign assistance programs.
Effective design helps ensure programs have the resources
needed to achieve objectives, while program monitoring and
evaluation help implementers and missions identify and address
fraud and other risks that prevent programs from achieving
desired results. Our audit work revealed persistent weaknesses
in design in Egypt, Jordan, and the West Bank. Similarly, our
investigations revealed widespread corruption in cross-border
programs in Syria and other parts of the world, which point to
lack of adequate monitoring of implementers by U.S. officials.
Particularly, significant shortcomings in internal controls
around procurements and aid distribution by WFP in the Syria
program bring into question whether USAID is doing enough to
ensure U.S. taxpayer funds being spent through Public
International Organizations (PIOs) are adequately protected.
Ultimately, shortcomings in USAID's program design and
monitoring have weakened its ability to ensure programs have
the resources needed to achieve objectives and identify and
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address fraud and other program risks.
USAID invests in development projects that it expects can be
supported locally and have a lasting impact. However, our work
consistently points to concerns about the level of assurance
USAID has in achieving sustainability in its programs. Efforts
under USAID's Local Solutions initiative, a reform strategy
under USAID Forward, have similarly fallen short of
expectations. Our reports have identified challenges in
missions' implementation of the initiative. Until the Agency
fully assesses the capacity of host countries or government and
local entities and enhances oversight, USAID funds will remain
at risk.
Contingency operations and other foreign assistance efforts require
coordination with multiple U.S. Government agencies. However,
USAID's development priorities do not always align with other
agencies' priorities, making it difficult for USAID to achieve
its core development mission. In particular, coordination with
the State Department, which leads multiagency operations that
respond to diplomatic and security crises, has presented
challenges to USAID's project planning and execution. Despite
broad interagency guidance on State's role in politically
sensitive environments, USAID employees are sometimes unclear
as to how to manage additional layers of review, respond to
changing priorities, and balance short-term and long-term
priorities. Our work in countries such as Egypt, Tunisia,
Libya, Yemen, and Pakistan underscore the need for
reconciliation of competing priorities.
USAID's culture is a major barrier to addressing these challenges--
notably, the Agency's reliance on its implementing partners, which has,
in some cases, extended to program oversight. This practice ignores the
most basic internal control and sets USAID up for unsatisfactory
outcomes. We have made numerous recommendations that call for more
robust monitoring and oversight, including conducting more frequent
site visits to vendors and warehouses to verify product quality before
cross-border shipment, greater use of pre-award assessments of
implementers, greater use of approval thresholds and condition
precedents prior to release of funds, and assessments of implementer's
accounting and procurement systems.
Question. You have only been in your post for about one year now,
but I know you have done significant work to begin to implement reforms
in your office. Could you discuss in further detail how you have
reformed your office since being confirmed?
What challenges did you face in ensuring proper oversight of
your respective agencies, and how have you worked to address
those challenges?
How can we help you improve your oversight? Are there any
reforms you're seeking that need a change in law to achieve?
Please include any that we may have discussed during the
hearing as well as any we did not have a chance to discuss.
Answer. The reforms I have implemented--which were grounded in my
30 years of working in the accountability community--cut across our
entire operations and encompasses our people, processes, and work. My
assessment included individual meetings with all overseas staff, both
U.S. direct hire staff and Foreign Service Nationals, as well as
meetings with staff in Washington. Through these meetings, I gained a
stronger appreciation for the challenges they face, particularly as it
relates to foreign work environments. The actions that I have taken and
the reforms that have been implemented, are under way, or planned will
better position OIG staff to address these challenges. For example:
To strengthen my leadership bench, I filled five Senior Executive
Service positions with the talent and expertise needed to lead
our core functions--audit, investigations, and management. We
are now working to develop new strategic plans and performance
measures.
I called for more transparency and open communication to strengthen
leadership engagement with staff and encourage more robust
dialogue on our work, especially in areas where there is
professional disagreement.
To prioritize, add rigor to, and achieve efficiencies in our work,
I called for cross-cutting teams that would leverage staff
knowledge and skills across our various offices. To support
this new model, I consolidated 11 largely independent overseas
offices to 4 strategically located hub offices,\2\ breaking
down OIG's historically stove-piped organization. The new
structure, coupled with more centralized planning, has already
improved collaboration by bringing together key players, and
facilitating leadership and staff buy-in at the start of an
audit or investigation and the messaging of the results.
Moreover, the hub structure will result in work that links
USAID headquarters-based strategies to field-level
implementation.
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\2\ OIG's hub offices currently oversee one of the following
regions each: Latin American and the Caribbean, Eastern Europe,
Eurasia, and the Middle East, Africa, and Asia. Satellite offices in
these regions provide targeted oversight in targeted countries and/or
programs: Haiti, Senegal, Uganda, Egypt, West Bank and Gaza program,
and Pakistan.
To further help staff excel under this new model, I hired a Quality
Assurance Director charged with continuously assessing our
policies to ensure they thoroughly reflect oversight
accountability standards and best practices and support the
highest quality of work. I also hired a Communications Officer
to enhance the quality of all of our written communications and
set the course for developing audit and investigation messages.
I am currently working to bring on board a Process Improvement
Director, who will continually assess our business operations
and policies, and recommend changes that reflect the practices
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of leading professional service organizations.
To ensure staff have the knowledge and skills needed to effectively
conduct their work and combat program fraud, waste, and abuse,
I hired a Training Director to design a disciplined
professional development program--a program that aligns core
training to each job series and position, and supports
individual development plans. I have also initiated a
comprehensive review of our performance standards to ensure
that they promote and hold staff accountable for performance
and results and accurately reflect key mission goals and key
work impacts.
In addition to formal training, I am providing staff other
development opportunities. For example, in January, we will
launch a Communities of Practice--information sharing sessions
on topics of interest to staff and that align with our work,
mission and goals. Also in January, I will begin hosting
regular Leadership Brown Bags for GS-14s and above and Foreign
Service equivalents, and Leadership Development Exchanges for
GS-13s and below and Foreign Service equivalents to discuss
organizational topics including performance, leadership, and
professional development. These forums not only provide
additional opportunities for me to engage with my staff on
topics they identify as key to their roles, development, and
overall career, they will further cultivate a strong community
within OIG.
I have also taken action to ensure our full independence--the
foundation of any OIG. Shortly after my confirmation, I took action to
develop a cooperation memorandum with the USAID Administrator to
reaffirm OIG's authority to have full access to the documentation and
people our auditors and investigators need to carry out our mission.
The memorandum was signed by USAID Administrator Gayle Smith in
February 2016 which she released to all USAID staff, underscoring our
authority and access rights. In addition, I tasked a team to change the
way we track audit recommendations. Historically, the agencies we audit
have been responsible for closing out our recommendations. We are
taking back this responsibility. By independently determining what
actions meet the intent of our recommendations and when those actions
satisfy our recommendations, we can keep agencies on track and, most
importantly, ensure the problems we identified have been addressed.
Finally, as I briefly mentioned during my testimony,\3\ one
challenge that I face concerns my oversight responsibility for the
Overseas Private Investment Corporation (OPIC). Each year during
appropriations deliberations, OIG and OPIC negotiate and sign an
interagency agreement to identify the types of oversight to be
performed in the upcoming fiscal year. This situation is untenable.
Effective oversight of OPIC demands a fully independent IG with full IG
Act authorities, including audit rights and a funding mechanism that
supports OIG oversight activities and is not subject to negotiation
with OPIC management. Several options have been proposed in recent
years, and I encourage Committee members to work toward a permanent
solution for OPIC oversight that provides the full authorities that
should be vested in an OIG.
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\3\ USAID Top Management Challenges and OIG Initiatives, Statement
of the Honorable Ann Calvaresi Barr before the Senate Committee on
Foreign Relations, Subcommittee on State Department and USAID
International Operations, and Bilateral International Development
(December 8, 2016.
Question. You noted in your testimony and during the hearing that
aligning USAID IG's system of pay for Foreign Service investigators
with that of the rest of the Federal law enforcement community is your
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top legislative priority.
Could you discuss further the current discrepancy, why it
exists, and what we need to do to fix it?
Answer. Providing compensation to OIG's Foreign Service criminal
investigators that is consistent with Law Enforcement Availability Pay
(LEAP)--compensation provided to Civil Service criminal investigators
across the Federal Government--has been one of our greatest personnel-
related challenges. In particular, LEAP provides a premium for
additional hours worked, allowing Civil Service criminal investigators
to earn up to $160,300 per year while assigned domestically and up to
$155,489 per year while assigned overseas. \4\ Because LEAP does not
apply to Foreign Service criminal investigators, my predecessors have
relied on a special differential to compensate these employees for
additional time worked and extra availability to work. However, the
IG's authority to cap these special differentials at an amount
commensurate with LEAP pay caps recently came under question. Absent
such authority, some of our most senior Foreign Service criminal
investigators would have earned in excess of $200,000 per year.
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\4\ Both of these amounts are expected to increase in the coming
weeks in line with an anticipated government-wide pay increase in early
January 2017.
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With the recent enactment of the Department of State Authorities
Act, Fiscal Year 2017 (Public Law 114-323), this longstanding issue is
now resolved. Without this authority, my ability to attract, hire, and
retain a stable, well-qualified investigative workforce would have been
impaired. I sincerely appreciate the Subcommittee's attention to this
matter, as well as the full Committee's continuing support.
Question. During the hearing, we briefly discussed how you have
begun to work on USAID's policies and compliance with Executive Order
13526, the executive order pertaining to the handling of classified
national security information.
Can you discuss at greater length what your office has done
to investigate IT security and handling of classified
information at USAID?
How should the new leadership at USAID prioritize this
issue?
Answer. Our most recent audit of USAID's compliance with the
Federal Information Security Modernization Act (FISMA) determined that
the agency has taken appropriate steps to resolve a longstanding
deficiency related to inadequate security plans and control testing for
its enterprise risk management system process.\5\
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\5\ USAID Has Implemented Controls in Support of FISMA, but
Improvements are Needed; Report No. A-000-17-001-C (Oct. 27, 2016).
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Despite this progress, we reported earlier this year that USAID's
organizational structure continues to put its information systems at
risk. Specifically, we found that the USAID chief information officer
(CIO) reported to the assistant administrator for the Bureau of
Management--not directly to the agency Administrator or Deputy
Administrator, as required by law. As a result, the CIO may have
limited authority in ensuring information technology projects and
actions are funded, tracked, and prioritized at a level commensurate
with the direction and goals of the Agency as a whole. In addition, one
officer performs security control activities and reviews activities for
complying with FISMA--roles and responsibilities typically associated
with a chief information security officer and a deputy CIO,
respectively-calling into question the independence of USAID's FISMA
compliance reviews.
Given the increasingly sophisticated and widespread hacking of
Federal systems, USAID must be ever-vigilant in promoting effective
cyber security, particularly when it comes to protecting classified
information. In the wrong hands, such information can be used to
threaten U.S. interests, personnel, or activities. Earlier this year,
we reported on deficiencies in USAID's compliance with Executive Order
13526, Classified National Security Information, and related National
Archives and Records Administration (NARA) regulations.\6\ Overall, we
found that agencywide attention was needed to correct deficiencies
related to program management, security training, classification, and
reporting program activities and results to NARA's Information Security
Oversight Office. To address these weaknesses, USAID committed to
developing and implementing a comprehensive corrective action plan.
Completing this action plan should be a major focus area for incoming
USAID leadership.
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\6\ USAID's Implementation of Executive Order 13526, Classified
National Security Information, Needs Significant Improvement; Report
No. 9-000-16-001-P (Sept. 30, 2016).
Question. I was glad to have the opportunity to discuss the
challenges we face in administering aid and programs in non-permissive
environments--particularly in Syria. Your office has identified corrupt
practices in a number of cross-border aid programs to Syria that were
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operating from Turkey.
Could you discuss further your findings, and how they were
used to make changes in the way we implement life-saving
humanitarian assistance to civilians in Syria?
Given this aid is taking place in non-permissive
environments, how does your team gain access to conduct
oversight?
What challenges do you face? Do you have to rely on partners
to gain access to certain sites?
Are you seeing greater access issues for investigations, as
well as greater oversight challenges at USAID, as our forces
draw down in Afghanistan?
Answer. The fraud schemes uncovered by our investigators during
unannounced visits to warehouses in Turkey and Jordan demonstrate the
complexities in overseeing U.S. aid programs in nonpermissive areas and
the vulnerabilities oversight gaps create. These schemes include
collusion, bribery, and product substitution. Yet oversight of the
cross-border programs, which involved 33 awards totaling more than $337
million, fell under the responsibility of four USAID employees deployed
to Turkey and Iraq.
In Afghanistan, as in Syria, it is difficult to get approval to
access certain areas. However, our investigations work in Afghanistan
revealed a number of procurement weaknesses that diminish USAID's
command over the programs it funds, including a lack of fair and open
competition, insufficient US. Government monitoring, infrequent site
visits to vendors, a lack of risk assessments of vendors, and a lack of
approval thresholds for contracts and grants, and questionable
segregation of duties. Our audits also found questionable costs. To
provide more rigorous oversight of programs in Afghanistan, USAID
designed a multitier monitoring plan to leverage data from multiple
sources, such as the host government, donors, beneficiaries, and third-
parties. However, as we reported, the system as designed was only used
in 1 of 127 awards.
In response to our investigative findings, USAID is implementing
third-party monitoring to reduce reliance on implementer self-
reporting, requiring all employees to attend OIG training on common
fraud schemes and fraud indicators, and increasing site visits to
include unannounced site visits to vendors and warehouses. In addition,
USAID's Office of Foreign Disaster Assistance (OFDA) hired a compliance
officer to prevent future fraud and institute better monitoring and
evaluation practices in close coordination with our Office of
Investigations. Continued vigilance and follow-through on these and
other new initiatives will be critical to protecting USAID's
investments in the conflict areas such as Syria and Afghanistan.
One area that presents unique oversight challenges for USAID
involves PIOs--which collectively receive about 40 percent of USAID's
budget for the humanitarian response in Syria--due to USAID's limited
authority to oversee these organizations. To identify opportunities
where USAID can better ensure due diligence in monitoring despite these
limitations, we are examining how USAID assesses and mitigates risks
before it awards funds to a PIO and identifies vulnerabilities
associated with relying on PIOs to provide U.S. foreign assistance.
We remain committed to providing oversight in Syria and
Afghanistan--despite the decreasing number of areas our investigators
are permitted to go. Our efforts aim to provide the greatest return on
investment, such as training agency and implementer personnel and
beneficiaries on program risks and fraud indicators. We also maintain
dialogue with OFDA and USAID's Office of Food for Peace on
strengthening future awards and programs, and are coordinating with
international donors, including PIOs, which have access to areas where
OIG staff and other U.S. Government personnel are not permitted.
Information shared among bilateral donors, PIOs, and our investigators
through the Syria Investigations Working Group that we established
further strengthens oversight and helps inform our work to stop fraud.
Our region- and country-specific fraud awareness campaigns and hotlines
also help close oversight gaps. For example, working with Transparency
International--Pakistan, we stood up the Pakistan Anti-Fraud Hotline,
which has provided us a number of leads into alleged fraud, including
bribery, collusion, and theft. For instance, we have received over
7,000 complaints that have led to cases being opened, programs being
terminated, numerous employee terminations and savings and recoveries
in the millions. The malaria campaign and hotlines we set up in
Nigeria, Malawi, and Benin have similarly prompted individuals to
contact OIG with allegations of fraud such as theft, diversion, and
resale of U.S. Government-funded antimalarial commodities. Globally,
illicit proceeds from the sale of stolen or falsified antimalarial
medicine total more than $60 million a year.
Finally, OIG developed "Fraud Prevention and Compliance--A Pocket
Guide for the Middle East Crisis Humanitarian Response'' \7\ to assist
the Agency with monitoring its implementing partners in the response to
the humanitarian crisis in Syria and Iraq. The guide addresses trends
identified in our investigative experiences and meetings with USAID
implementing partners across the region, and provides a quick reference
to detect weaknesses in internal controls and common fraud schemes.
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\7\ OIG USAID, Fraud Prevention and Compliance: A Pocket Guide for
the Middle East Humanitarian Crisis; August 1, 2016, 3rd edition.
Question. I also appreciated our discussion of the challenge of
providing adequate oversight of contracts and grants overseas. As State
and USAID continue to prioritize the local ownership and involvement
that comes with contracts and grants, what recommendations do you have
for USAID to improve the design, management, and oversight of these
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programs?
How receptive has USAID been to these recommendations?
Are there any immediate steps you can take when you find
such fraud in addition to the IG-created hotline and law
enforcement partnership?
Answer. Whether USAID works with U.S.-based contractors or non
U.S.-based nongovernmental organizations (NGO), the deliberative
decision making process should be the same when designing and managing
awards and deciding on the degree of monitoring and evaluation
necessary to protect U.S. interests. Poor design can limit the impact
of USAID projects or derail them before they begin.
However, USAID has been challenged to develop and maintain a fully
equipped, fully trained workforce to design, manage, and oversee its
development portfolios. With Foreign Service Officers' relatively short
overseas tours of duty (between 1 and 4 years), USAID has relied on
contractors and outside organizations to implement and maintain
progress on development projects. USAID also relies heavily on local
foreign nationals, who often stay at missions for years, to function as
repositories for institutional knowledge, giving them significant
influence in the delivery of U.S. foreign assistance. Moreover,
frequent turnover can limit the effectiveness of U.S. direct hire
employees, who are ultimately charged with ensuring program
achievements and curbing opportunities for fraud.
Our audits have also shown that some programs are at risk because
USAID has not adequately secured host country commitment to sustain the
gains made through the initial U.S. investment. For example, continued
operations at 80 health care facilities in Haiti were at risk because
USAID lacked a plan to transfer responsibility for health workers'
salaries at these facilities. Similarly, the host government lacked
funds to maintain deteriorating USAID-funded roads in the West Bank and
Gaza.
Despite such outcomes, USAID lacks a robust pre-award process to
clearly identify local implementers who do not have the institutional
capacity to meet the administrative requirements for managing Federal
funds. For example, USAID Paraguay failed to determine in its preaward
survey that a local organization did not have sufficient capacity to
manage USAID funds, assess results, or track the progress of a $24
million program intended to strengthen the internal management and
government systems of select public institutions. USAID may elect to
work with implementers that carry some level of risk. However, in some
cases, USAID does not include conditions in the awards to minimize this
risk, such as provisions requiring the implementer to take corrective
actions before funds are disbursed. Even when such provisions have been
put in place, it has been the tendency to not adequately monitor and
enforce them. Ensuring that USAID staff routinely monitor and know the
types of questions to ask and observations to make to detect potential
losses and fraud is critical in overseeing high-risk implementers,
especially those working in countries with high rates of corruption.
Regarding agency receptiveness to OIG recommendations, our audits
have traditionally focused on activities and projects, and our
recommendations have, accordingly, been made to USAID mission directors
and other unit heads. These managers tend to be receptive and take the
actions we recommended for remedying the problems we identified. As
part of the reforms I am making, we are moving to an approach that
focuses our oversight of development programs at a more strategic level
to have a more far reaching impact across the agency and its programs
worldwide. As such, our recommendations will be issued more broadly to
bureau and agency leadership, I anticipate that reception at this level
will be similar.
In addition to our training, hotlines, and other outreach efforts,
we regularly meet with USAID officials to bring audit recommendations
and investigation concerns to the Agency for action. Our coordination
with international donors and internal agency integrity working groups
serve to further deter fraud, waste, and abuse.
Question. We discussed how U.S.-funded humanitarian assistance
projects in Syria are prone to more elevated risks than programs funded
by other nations.
Given this information, and given that fraud and loss are
the two categories for which you have the highest numbers of
reported complaints, do you feel that a risk assessment for
fraud and loss should be a requirement for any implementer
distributing United States foreign aid? Why or why not?
Is it in fact the case that State and USAID do not require
implementing partners to conduct a fraud risk assessment before
pitching and implementing risk controls?
Do you agree with GAO's recommendation that a fraud risk
assessment should be required for all USAID partnerships in
Syria?
Is this fraud risk assessment something that has come up in
any of your past ongoing investigations or reports?
Answer. In providing aid and assistance in Syria and similar
nonpermissive environments, USAID assumes some measure of risk in each
contract and grant it awards. While risk cannot entirely be eliminated
in these environments, the risk of fraud can be mitigated through
quality control procedures in contractual language of awards with
implementers. For any project conducted in a nonpermissive environment,
implementers should include in their proposal submission a detailed
mitigation plan for addressing known fraud vulnerabilities and risks.
Other measures include third-party monitoring, training for
Agreement and Contracting Officer Representatives (AOR/COR) that
improves their capacity to question implementer self-reporting,
workforce assessments to determine the right AOR/COR-to-award ratio,
increased involvement of financial management specialists in monitoring
and evaluation planning, mandated AOR/COR visits to project sites and
allowing technical experts to conduct vendor and implementer warehouse
visits, and deploying AORs/CORs during contingency operations.
OIG agrees with the Government Accountability Office recommendation
that a fraud risk assessment should be required for all USAID
partnerships in Syria. Subsequent to the problems our investigators
uncovered with implementers in Syria, OFDA took steps to improve its
solicitation process and now requires implementers to address fraud
risks in their proposal submission and to sign a Fraud Mitigation Self-
Certification Checklist as part of its submission.
We see OFDA's actions as positive steps, but we have yet to assess
their impact. Looking ahead, we will continue to consider the
effectiveness of the measures both USAID and implementers employ to
guard against fraud, including the role fraud risk assessments play in
delivering aid in Syria. In particular, we are committed to continuing
to be an effective partner with the Departments of State and Defense
OIGs to carry out our Lead IG responsibilities for Operation Inherent
Resolve (OIR), the operation to counter the Islamic State of Iraq and
the Levant in Iraq, Syria, and the surrounding region. Joint oversight
of initiatives such as Lead IG oversight of OIR demands upfront
planning and ongoing coordination. Therefore, in stepping up our
scrutiny of programs under OIR and other initiatives that involve
multiple Federal agencies, we continue to expand collaborative efforts
with our oversight partners, including a joint audit planning session
that occurred in November 2016 and another planned for this coming
February. Our quick reference fraud prevention guide can also assist
Disaster Assistance Response Teams detect lapses in internal controls,
such as implementing partners' failure to conduct a fraud risk
assessment.
Question. You identified that many operations overseas involve
multiple United States government agencies, and that sometimes USAID
priorities and goals don't match up with those of other agencies. Can
you discuss in more detail your findings on where interagency
strategies haven't linked up, and what are your recommendations to the
next administration for ensuring these conflicts do not occur?
Answer. USAID coordinates with other U.S. foreign assistance
agencies on a number of cross-cutting U.S. Government initiatives like
Feed the Future, Power Africa, the President's Emergency Plan for AIDS
Relief (PEPFAR), and the Central America Regional Security Initiative
(CARSI), and in some cases assumes a lead role in advancing U.S.
Government efforts. OIG has prioritized oversight of such initiatives
and, based on recent work, identified areas in which USAID can work to
improve interagency coordination and implementation of U.S. Government
development initiatives overseas.
A key concern we identified relates to the interagency relationship
between the Department of State and USAID, especially in cases where
USAID uses Economic Support Funds (ESF) to support aid and assistance
programs for promoting economic or political stability in areas where
the United States has special interests. While USAID is responsible for
administering ESF programs, State is responsible for policy direction
and justification of these programs, creating additional challenges in
countries where USAID portfolios are funded mainly through ESF--like
those in the Middle East and Central and South Asia--and State's focus
is on diplomacy rather than development goals.
This State-USAID dynamic has a profound effect on missions' ability
to effectively follow USAID guidance on designing and implementing
developmentally sound projects. We have also reported that
infrastructure projects under this model lacked sustainability and
failed to fully realize intended results. For example, our audit of
USAID's implementation of programs funded under the Enhanced
Partnership with Pakistan Act of 2009, Public Law 111-73, revealed that
State's responsibility for budget and project decisions made it
difficult for USAID/Pakistan to reconcile its long-term development
objectives with State's shorter-term priorities. \8\ In general, State
focused on stabilization and energy programs, while USAID focused on
other priority areas, such as health, education, and economic growth.
In response to our recommendation that USAID institute an interagency
forum to better present its development perspective for State-led
operations, USAID's administrator engaged State leadership to discuss
solutions that allow both agencies to pursue their objectives
simultaneously, including reconciling interests at the beginning of
planning and programming development assistance. It will fall on the
next administrator to ensure this forum is put into place and used
effectively.
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\8\ Competing Priorities Have Complicated USAID/Pakistan's Efforts
To Achieve Long-Term Development Under EPPA; Report No. G-391-16-003-P
(Sept. 15, 2016)
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We have also suggested USAID needs to provide alternative
development strategies on how it should adapt its project design
process in politically sensitive transition environments. In
politically sensitive environments when program decisions are made by
other federal entities, USAID needs clear guidance on how to modify its
design and implementation process to fit the circumstances. We
recommended that USAID improve guidance on how to increase the
flexibility of implementing mechanisms, especially in the case where
expedited implementation is critical.
Finally, we have a robust portfolio of ongoing or planned audits
that will further assess USAID's efforts to work with other agencies to
achieve U.S. developmental goals. For example, our ongoing audit of the
Power Africa initiative will determine whether projects under this
complex program--which requires extensive coordination between USAID,
the Millennium Challenge Corporation, the Overseas Private Investment
Corporation, and the United States African Development Foundation, and
other Federal components; multiple African governments; and private
industry--are on track to achieve the initiative's goal to greatly
expand access to electricity in sub-Saharan Africa by providing at
least 60 million new households and businesses with on- and off-grid
power solutions. We also are planning to undertake work on CARSI, a
major U.S. Government initiative in Central America. In addition, each
year, we develop and implement our Joint Plan for Oversight of Foreign
Assistance to Combat HIV/AIDS, Tuberculosis, and Malaria with the OIGs
for State and the U.S. Department of Health and Human Services.\9\
Audits under the plan, including one on PEPFAR's Site Improvement
Through Monitoring System, are aimed at ensuring, among other things,
that proper coordination is taking place in implementation of PEPFAR
programs throughout the world.
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\9\ OIG, USAID, DOS, DHHS, Fiscal Year 2017 Coordinated Oversight
Plan of Foreign Assistance to Combat HIV/AIDS, Tuberculosis, and
Malaria; August 2016.
Question. As I mentioned during the hearing, I appreciate the goal
that USAID has to ensure that communities have a stake in continuing
activities and services after USAID involvement ends, which then builds
the skills of local stakeholders. Your testimony and insights were
particularly insightful on where the implementation of this concept
falls short.
In greater depth, please discuss what steps does USAID need
to take as they develop these kinds of projects to ensure local
sustainability and ownership once the U.S. involvement ends?
Answer. USAID's development policy promotes the achievement of
sustainable results. To help sustain development gains after agency
programs end, USAID's program development guidance calls for investing
in communities that have a stake in continuing activities and services,
building the skills of local stakeholders, and ensuring public- or
private-sector participation and financial backing. Further, USAID's
Local Solutions initiative has explicitly sought to promote country
ownership and sustainability of development outcomes by providing
program funding directly to host country governments and local
organizations--those typically based in the country receiving U.S.
development assistance. As it undertakes development work worldwide,
USAID often works directly with host country governments in
implementing its programs. In these cases, it is imperative that USAID
secures the host country's commitment and assess its ability to support
and sustain the initial investment. For such projects, the host country
must possess the technical and financial capacity to effectively
maintain and utilize USAID-funded projects.
USAID's efforts to ensure sustainability, including programs under
Local Solutions, however, have sometimes fallen short of expectations.
In my hearing I spoke of our audit work on a West Bank and Gaza
construction program and noted the inability of the local government to
maintain the program's results.\10\ Additional audit reports also
identified shortcomings in USAID missions' implementation of activities
using local government and NGO implementers in countries such as
Pakistan and Paraguay.\11\
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\10\ Audit of USAID/West Bank and Gaza Construction Programs;
Report No. 8-294-16-001-P (Feb. 22, 2016).
\11\ Competing Priorities Have Complicated USAID/Pakistan's Efforts
to Achieve Long-Term Development Under EPPA; Report No G-391-16-003-P
(Sept. 8, 2016); Audit of USAID/Paraguay's Democracy and Governance
Program; Report No. 1-526-16-004-P (Jan. 21, 2016).
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Based on our work to date, before USAID makes any decisions to
transfer funds to a local organization, it is incumbent for it to be
certain that the recipient organization has adequate procurement and
accounting systems to manage United States funds in accordance with
applicable regulations. This calls for an effective pre-award
assessment process and for USAID to mitigate any risks identified
before disbursing funds. OIG's oversight coverage of USAID's use of
local organizations has systemically identified this as a problem.
Equally critical is for USAID to have a robust post award follow-up
process to hold local organizations accountable to correct deficiencies
identified during the pre-award assessments. Where USAID enters into an
arrangement where it identified a lack of implementer capacity or other
weaknesses that could enable fraud during the pre-award assessment,
then USAID must as part of its program design incorporate the
appropriate measures to guarantee that resources will be made available
to continuously monitor and evaluate the implementer's progress and
internal controls. Again, OIG's oversight work addressing programs that
rely on local implementers has shown that these critical steps have
been lacking, a condition that can enable fraud, waste, and abuse and
lead to under achievement of development goals.
OIG is currently taking a strategic look at USAID's Local Solutions
initiative to assess whether its efforts are working to strengthen
local capacity, enhance and promote country ownership, and increase
sustainability. We anticipate issuing this report in the coming year.
Question. As we discussed during the hearing, the GAO has
identified a lack of parity in the information that State and USAID
share on ForeignAssistance.gov, the centralized public source of
information on U.S. foreign aid and assistance online.
Can you discuss whether your office is involved in analyzing
these efforts to ensure that USAID is sharing pertinent
information with ForeignAssistance.gov, as was mandated by
Congress?
Could you discuss any findings regarding tracking and
managing foreign assistance funds?
Do you have any recommendations for USAID for managing
information and improving transparency of how taxpayer funds
are spent on our efforts abroad?
Answer. Historically, audits have frequently reported problems with
data quality and reliability and these issues have been included in our
report of top management challenges over the last several years.
Weaknesses in data with quality and reliability problems that support
performance results can negatively impact foreign assistance decisions.
For example, we reported that USAID/West Bank and Gaza's financial
reporting was not accurate when reporting against foreign assistance
program areas\12\. U.S. Government agencies use the same State
Department framework for planning and reporting on their foreign
assistance program areas, for example, education or health. The
framework involves coding expenses to indicate which objective and
related program areas foreign assistance funding is supporting. We
conducted an audit to determine if USAID/West Bank and Gaza, which
budgeted $1.1 billion for fiscal years 2012 to 2014, was accurately and
consistently reporting which funds went to which areas and the impact
of the mission's spending. We found that, although the mission's budget
reporting was accurate; reporting on obligations and disbursements to
the program level was not. Further, we identified reporting problems
with performance information for 9 of 31 projects active during the
three fiscal years. We also recommended that the USAID/West Bank and
Gaza mission verify that each project's financial information aligns
with performance indicators. USAID took final action on this
recommendation.
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\12\ USAID/West Bank and Gaza's Financial Reporting Should Be
Clearer on Use and Results of Foreign Assistance Spending; Reporting
No. 8-294-17-001-P; (Nov. 18, 2016)
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With regards to transparency and accuracy of data, our office is
currently assessing USAID's readiness to comply with the Digital
Accountability and Transparency Act of 2014 (DATA Act), which seeks to
make federal spending more accessible, searchable, and reliable.
Beginning next year, we are prepared to assess USAID's compliance with
the DATA Act to promote more accurate and transparent reporting of
USAID spending, which may lead to what is shared with the public via
ForeignAssistance.gov. This work will make appropriate recommendations
for better managing information and improving transparency of how
taxpayer funds are spent.
Question. You also noted in your testimony that USAID often has
unreconciled transactions with other federal agencies, and has an issue
with reconciling their fund balance with the Treasury's records.
What does USAID need to do to get back on track here? As we
discussed, we need all of our federal agencies to have records
that ultimately match up to the Treasury.
Answer. The U.S. Government has established strict financial
management requirements to better ensure agencies are effective
stewards of Federal resources. We continue to reinforce the importance
of effective financial management and reporting systems through its
audits of USAID's compliance with these governmentwide requirements. We
assess USAID's controls most directly through our annual audits of
USAID financial statements, including our most recent audit for Fiscal
Years 2016 and 2015, issued November 15, 2016, which continued to note
the deficiencies cited above.\13\ The persistence of these deficiencies
informed one of five management challenges facing USAID in fiscal year
2017: Meeting Governmentwide Financial and Information Management
Requirements. We have identified these deficiencies in past years,
making both long-standing areas in which USAID must improve its
financial management and accounting systems and practices.
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\13\ Audit of USAID's Financial Statement for Fiscal Years 2016 and
2015, Report No. 0-000-17-001-C, November 15, 2016
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USAID has made progress reconciling its Fund Balance With Treasury
account (FBWT) with the balance reported by the U.S. Department of the
Treasury (Treasury). However, at the close of fiscal year 2016, these
differences totaled $195 million, of which $141 million was
unexplained, and we consider USAID's inability to reconcile these items
as a material weakness. As we reported, these differences persist
because USAID has not reconciled its FBWT account with Treasury's fund
balance on a monthly basis, thereby resolving identified differences in
a timely manner. Instead, USAID simply adjusted its FBWT account to
agree with Treasury's fund balance. In making a recommendation that
USAID's Chief Financial Officer address this weakness we urged USAID to
institutionalize the monthly reconciliation of the FBWT account.
Further, a process USAID initiated in fiscal year 2014 to coordinate
with Treasury and the Office of Management and Budget (OMB) to resolve
these differences has not been completed. USAID will need to follow
through on its plans to work with Treasury and OMB to resolve this
issue.
With respect to USAID unreconciled transactions with other
agencies, we reported that USAID has over $3 billion in such
transactions as of September 30, 2016. USAID was required to reconcile
$596 million of the total amount under OMB Circular A-136, but has made
little progress. While USAID is likely to address timing differences,
one cause of USAID's unreconciled transactions, differences resulting
from accounting errors for example, will require a special effort and
greater resources. These are significant deficiencies, and we will
continue to closely watch USAID's actions to correct them.
Additionally, we have ongoing and planned audits on USAID's compliance
with Data Act and FITARA requirements and efforts to reduce improper
payments.