Foreign Assistance: U.S. Democracy Assistance for Cuba Needs	 
Better Management and Oversight (15-NOV-06, GAO-07-147).	 
                                                                 
U.S. law authorizes aid for nonviolent democratic change in Cuba.
From 1996-2005, the Department of State (State) and the U.S.	 
Agency for International Development (USAID) awarded grants	 
totaling $74 million to support such change. A presidential	 
commission recently recommended increasing funding for these	 
efforts. This report examines (1) agency roles in implementing	 
this aid and selection of grantees; (2) types of aid, recipients,
and methods of delivery reported in 2005; (3) oversight of	 
grantees; and (4) data about the impact of this aid. To address  
these objectives, we analyzed the activities and internal	 
controls, and USAID's oversight and management of, 10 grantees	 
with about 76 percent (in dollars) of total active awards for	 
Cuba democracy aid. Our review focused on USAID because State's  
first awards were not made until mid-2005.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-147 					        
    ACCNO:   A63388						        
  TITLE:     Foreign Assistance: U.S. Democracy Assistance for Cuba   
Needs Better Management and Oversight				 
     DATE:   11/15/2006 
  SUBJECT:   Accountability					 
	     Federal aid to foreign countries			 
	     Foreign aid programs				 
	     Grant administration				 
	     Grant award procedures				 
	     Grant monitoring					 
	     Grants						 
	     Internal controls					 
	     International relations				 
	     Program evaluation 				 
	     Development assistance programs			 
	     Cuba						 

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GAO-07-147

   

     * [1]Results in Brief
     * [2]Background

          * [3]Conditions in Cuba Pose Substantial Challenges for U.S. Assi
          * [4]Commission Recommends Increased Assistance and Identifies U.

     * [5]U.S. Assistance Supports Civil Society; Most Awards Were Bas

          * [6]State- and USAID-Led Interagency Process Implements U.S. Ass
          * [7]U.S. Assistance Is Intended to Support the Development of Cu
          * [8]USAID and State Made Awards to Three Types of Grantees
          * [9]Grantee Selection Was Based on Unsolicited Proposals until 2
          * [10]Agreements Often Modified to Increase Funding and Extend Com

     * [11]Grantees Provided Assistance and Information to Recipients U

          * [12]U.S. Democracy-Related Assistance Since 1996
          * [13]Grantees Provided Four Types of Assistance in 2005
          * [14]Recipients of U.S. Assistance Included a Range of Cuban Civi
          * [15]Several Methods Used to Deliver U.S. Assistance
          * [16]USINT Delivers Some Grantee and Other Assistance

     * [17]Monitoring and Oversight of Cuba Program Grants Did Not Prov

          * [18]USAID's Preaward Processes Were Inadequate
          * [19]Grant Agreements Did Not Support Program Accountability
          * [20]Cuba Program Office Inadequately Monitored and Oversaw Grant

               * [21]Policies and Procedures for Mitigating Risks at At-Risk
                 Gran
               * [22]USAID Does Not Effectively Monitor Grant Project
                 Implementat
               * [23]USAID Cuba Office Lacks Framework for Monitoring Cost
                 Sharin
               * [24]USAID Does Not Provide Adequate Training to Grantees

          * [25]USAID Does Not Appear to Routinely Follow Prescribed Closeou
          * [26]USAID's Weaknesses Contributed to Deficiencies Observed at T

     * [27]Some Data Available about the Impact of U.S. Assistance

          * [28]Operating Environment Presents Monitoring and Evaluation Cha
          * [29]USAID and Grantees Have Conducted Some Evaluations of Cuba A

               * [30]USAID and Grantee Evaluations of Cuba Assistance
               * [31]USAID's Informal Interviews with Cuban Dissidents
               * [32]USINT Assessments of Independent NGOs in Cuba

          * [33]USAID and Grantees Have Focused on Measuring and Reporting P
          * [34]USAID Program Office Has Started to Focus on Collecting Bett

     * [35]Conclusions
     * [36]Recommendations for Executive Action
     * [37]Agency Comments and Our Evaluation
     * [38]GAO Contacts
     * [39]Staff Acknowledgments
     * [40]GAO's Mission
     * [41]Obtaining Copies of GAO Reports and Testimony

          * [42]Order by Mail or Phone

     * [43]To Report Fraud, Waste, and Abuse in Federal Programs
     * [44]Congressional Relations
     * [45]Public Affairs

Report to Congressional Requesters

United States Government Accountability Office

GAO

November 2006

FOREIGN ASSISTANCE

U.S. Democracy Assistance for Cuba Needs Better Management and Oversight

GAO-07-147

Contents

Letter 1

Results in Brief 3
Background 5
U.S. Assistance Supports Civil Society; Most Awards Were Based on
Unsolicited Proposals 8
Grantees Provided Assistance and Information to Recipients Using Several
Methods; USINT Played Active Role 19
Monitoring and Oversight of Cuba Program Grants Did Not Provide Adequate
Assurance That Funds Were Used Properly 26
Some Data Available about the Impact of U.S. Assistance 37
Conclusions 44
Recommendations for Executive Action 44
Agency Comments and Our Evaluation 45
Appendix I Objectives, Scope, and Methodology 48
Appendix II Comments from the Department of State 53
Appendix III Comments from the U.S. Agency for International Development
56
Appendix IV GAO Contacts and Staff Acknowledgments 58
GAO Contacts 58
Staff Acknowledgments 58

Tables

Table 1: U.S. Policy Framework Identified in the Commission for Assistance
to a Free Cuba's 2004 Report 8
Table 2: Key Roles and Responsibilities for U.S. Democracy Assistance for
Cuba 9
Table 3: State and USAID Program Activities for Cuba Democracy Assistance
13
Table 4: State and USAID Cuba Democracy Assistance Grantees and Awards,
1996-2005 15
Table 5: Assistance to Individuals and Groups in Cuba in 2005 20
Table 6: Recipients of U.S. Democracy Assistance in Cuba in 2005 23
Table 7: Internal Control Standard Deficiencies Observed at Three
Grantees, March-April 2006 36
Table 8: Evaluations of USAID's Cuba Democracy Assistance, 1996-2005 39
Table 9: State and USAID Grantees and Awards that GAO Reviewed 50

Figure

Figure 1: Modifications in Total Authorized Length and Amount for 12 USAID
Cuba Democracy Assistance Agreements, November 1997 to May 2006 18

Abbreviations

DRL Bureau of Democracy, Human Rights, and Labor

IRS U.S. Internal Revenue Service

NED National Endowment for Democracy

NGO nongovernmental organization

OMB Office of Management and Budget

RFA request for application

USAID U.S. Agency for International Development

USINT U.S. Interests Section, Havana, Cuba

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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copyright holder may be necessary if you wish to reproduce this material
separately.

United States Government Accountability Office

Washington, DC 20548

November 15, 2006

The Honorable Jeff Flake Vice Chairman The Honorable William D. Delahunt
Ranking Minority Member Subcommittee on Oversight and Investigations
Committee on International Relations House of Representatives

The Cuban government systematically restricts nearly all political
dissent, denying its citizens basic rights to free expression,
association, and assembly. The Cuba Democracy Act of 19921 and the Cuban
Liberty and Democratic Solidarity (LIBERTAD) Act of 19962 authorized the
President to provide assistance and other support for individuals and
independent nongovernmental organizations (NGO) to promote peaceful,
nonviolent democratic change in Cuba through various types of
democracy-building efforts. From 1996-2005,3 the U.S. Agency for
International Development (USAID) awarded 40 grants or cooperative
agreements totaling $65.4 million4 to support the development of civil
society in Cuba. In 2005, the Department of State (State), through its
Bureau of Democracy, Human Rights, and Labor (DRL), awarded four grants
totaling about $8.1 million to support a range of democracy assistance
activities for Cuba. In 2004 and 2006, the Commission for Assistance to a
Free Cuba5 recommended increasing funding for this type of assistance.

At your request, this report examines (1) the roles and objectives of the
agencies implementing U.S. democracy assistance targeted at Cuba, and the
funding, characteristics, and selection of the grantees6 receiving awards
under this program; (2) the types, amounts, and recipients of this
assistance in 2005 and the methods used to deliver it; (3) USAID's
monitoring and oversight of these grantees; and (4) the availability of
data to evaluate whether U.S. assistance has achieved its goals. We plan
to issue a classified version of this report that provides additional
information about the methods used to deliver U.S. assistance to Cuba,
steps taken to reduce losses of assistance shipped to the island, and some
of the recipients of U.S. assistance in Cuba.

1Pub. L. No. 102-484, Div. A, Tit. XVII, Sec. 1705, 22 USC 6004.

2Pub. L. No. 104-114, Sec 109, 22 USC 6039, commonly known as the
Helms-Burton Act.

3Unless otherwise noted, all annual references are to the U.S. fiscal year
(Oct. 1-Sept. 30).

4The total includes modifications to awards made during 1996-2005.

5In October 2003, the President established the Commission for Assistance
to a Free Cuba to identify measures to help bring about an end to the
Castro dictatorship and U.S. programs that could assist an ensuing
transition. The Secretary of State chairs the commission, which includes
the Assistant to the President for National Security; the Secretaries of
Commerce, Homeland Security, Housing and Urban Development, and Treasury;
and the USAID Administrator.

In conducting this review, we analyzed selected characteristics of the 34
grantees that received one or more of 44 State or USAID awards for this
assistance from 1996-2005. We also analyzed the reported activities,
assistance delivered, and management and internal controls for 10 USAID
grantees with 14 awards active in 20057 (representing about 76 percent of
total State and USAID awards for Cuba democracy assistance in terms of
dollars). We focused our review on USAID because State did not award its
first grants until mid-2005 and on grantees with several years experience
working with USAID on Cuba democracy assistance. At USAID and State in
Washington, D.C., and at the offices of grantees in our sample in
Washington, D.C., and Miami, Florida, we analyzed key records and
interviewed agency officials and grantees to understand U.S. and agency
assistance objectives and the processes used to select and monitor
grantees and evaluate program. At the Departments of Treasury (Treasury)
and Commerce (Commerce), we discussed export licenses required for this
assistance. We also interviewed officials at the National Endowment for
Democracy (NED), a private nonprofit corporation funded through State's
annual appropriation that supports democracy promotion in Cuba and other
nations. We conducted fieldwork in Havana, Cuba, working out of the U.S.
Interests Section (USINT), a State post. In Havana, we interviewed U.S.
officials, leading dissidents, and foreign-embassy officials and observed
post activities. We conducted our work from August 2005 through November
2006 in accordance with generally accepted government auditing standards.
See appendix I for a more detailed explanation of our scope and
methodology.

6This report refers to NGOs that received either grants or cooperative
agreements as grantees. Under a grant agreement, the grantee is free to
implement an agreed-upon development program without substantial agency
involvement. Under a cooperative agreement, the grantee has a significant
amount of independence in carrying out its program, but the agency is
involved in selected areas deemed essential to meeting program
requirements and ensuring achievement of program objectives. These areas
include approval of work plans, designation of key positions and approval
of key personnel, and approval of monitoring and evaluation plans.

7The 14 awards consist of 1 State grant, 1 USAID grant, and 12 USAID
cooperative agreements.

Results in Brief

U.S. democracy assistance focused on Cuba is implemented through an
interagency process led by State and USAID. However, we found that
communication between these agencies about the implementation of this
assistance was sometimes ineffective. Most critically, since USAID does
not have staff in Cuba, the agencies had not established routine
communication links between USAID and USINT about the implementation and
monitoring of on-island activities. To support independent civil society
groups and individuals, State and USAID awarded 44 grants and cooperative
agreements between 1996 and 2005 to three types of grantees: (1) democracy
and human rights NGOs focused specifically on Cuba, which received about
51 percent ($37.3 million) of the assistance; (2) democracy and human
rights NGOs with a worldwide or regional focus, which received about 39
percent ($28.7 million); and (3) universities, which received about 10
percent ($7.6 million). About 95 percent (about $61.9 million) of USAID's
awards were made in response to unsolicited proposals.8 All four of
State's awards and the remainder of USAID's awards were made
competitively. USAID modified over two-thirds of its 40 awards, increasing
the estimated program cost almost eight-fold--from about $6 million to
about $50 million--and extending program completion dates by an average of
about 3 years.

USAID reported that its Cuba program had provided a wide range of
democracy-related assistance from 1996-2006. Dissidents in Havana said
that this assistance provided moral support and enhanced their ability to
continue their pro-democracy work. The 10 grantees that we reviewed in
detail delivered significant amounts of humanitarian and material
assistance,9 as well as training, and information. The recipients of this
assistance included Cuban human rights activists, political dissidents,
independent librarians, journalists, and political prisoners and their
families. The grantees reported using several methods to deliver
assistance to the island. According to grantees and U.S. officials, these
methods involve different security, flexibility, and cost considerations.
Some grantees have taken steps to reduce the risk of loss--due to theft or
confiscation by the Cuban government--of assistance shipped to Cuba. USINT
has distributed increased amounts of some types of democracy assistance
since 2000.

8An unsolicited proposal is submitted to the agency independently by the
organization applying for funding. The agency may choose to make a
noncompetitive award based on this proposal. In contrast, standard grant
or cooperative agreements are usually awarded competitively to
organizations responding to an agency request for applications or
proposals. See GAO, Foreign Assistance: USAID Relies Heavily on
Nongovernmental Organizations, but Better Data Needed to Evaluate
Approaches, [46]GAO-02-471 (Washington, D.C.: Apr. 25, 2002).

9Material assistance includes shortwave radios, DVD players, cameras, and
office equipment and supplies.

USAID's internal controls over the awarding of Cuba program grants and the
oversight of grantees do not provide adequate assurance that the grant
funds are being used properly or that grantees are in compliance with
applicable laws and regulations. We found that some preaward reviews of
grantees were not completed before grant awards, and USAID did not follow
up adequately to correct deficiencies identified by these reviews. In
addition, the standardized language in grants and cooperative agreements
lacked the detail necessary to support program accountability and the
correction of grantee deficiencies identified during preaward reviews. The
Cuba program office did not adequately identify, prioritize, or manage
at-risk grantees and did not have critical review or oversight procedures
in place to monitor grantee activities. We performed limited testing on 10
grantees and identified questionable expenditures and significant internal
control weaknesses with 3 grantees that USAID had not detected. The
program office also lacked adequate policies and procedures for reviewing
grantees' compliance with cost-sharing provisions in grant agreements.
Additionally, USAID does not appear to routinely follow prescribed
closeout processes to identify and recover inappropriate expenditures or
unexpended funds. These weaknesses in agency policies and procedures and
in program office oversight allowed the significant internal control
deficiencies we found at 3 grantees to go undetected and increased the
risk of fraud, waste, abuse, and noncompliance with laws and regulations
in the USAID program. We referred the problems we identified at these 3
grantees to the USAID Office of Inspector General.

Some information is available about the impact or results of U.S.
democracy assistance targeted at Cuba. State and USAID face a difficult
operating environment that presents monitoring and evaluation challenges.
For example, USAID does not have staff in Cuba and under Cuban law it is
illegal for Cubans to cooperate with U.S. democracy assistance activities.
In this context, USAID and its grantees have conducted some
evaluations--such as an assessment of some independent NGOs in Cuba
receiving U.S. assistance. However, although some anecdotal information
about program results is available, evaluations generally have been
limited in number and scope. Instead, USAID and grantees have largely
focused on measuring and reporting program activities, such as the volume
of humanitarian assistance or the number of books sent. Starting in
mid-2005, USAID initiated several efforts to collect better information
about results, such as increasing staff expertise and requiring
intermediate program evaluations when grants are modified.

In summary, U.S. efforts to support democratic change in Cuba face several
challenges. Some result from the difficult operating environment, while
others result from managerial weaknesses in the program. To enhance the
implementation of U.S. democracy assistance targeted at Cuba, particularly
in the context of the Commission for Assistance to a Free Cuba's call to
increase funding for these efforts, this report recommends that the
Secretary of State and USAID Administrator work jointly to improve
communication between responsible State and USAID bureaus and offices and
that the USAID Administrator work to improve USAID's management and
oversight of grantees.

In commenting on a draft of this report, State and USAID officials said
that they had begun taking steps to implement our recommendations. State
and USAID officials also provided technical comments, which we have
incorporated where appropriate.

Background

Conditions in Cuba Pose Substantial Challenges for U.S. Assistance

Conditions in Cuba--a hard-line Communist state that restricts nearly all
political dissent--pose substantial challenges to implementing,
monitoring, and evaluating democracy assistance. USAID does not work
cooperatively or collaboratively with the Cuban government, as it does in
most countries receiving U.S. democracy assistance.10 The United States
and Cuba do not have diplomatic relations, and the United States maintains
an embargo on most trade. USINT staff is restricted to Havana.11 USAID
does not have staff in Cuba, and Cuba program office staff have been
unable to obtain visas to visit the island since 2002. Additionally, the
range of Cuban partner organizations is significantly limited by U.S. law,
which generally prohibits direct assistance to the Cuban government and
NGOs with links to the government or the Communist Party.

10In commenting on a draft of this report, the Principal Assistant
Secretary of State for Democracy, Human Rights, and Labor Affairs noted
that State provides democracy assistance in several countries where it
does not work cooperatively or collaboratively with the national
governments.

Cuban law prohibits citizens from cooperating with U.S. democracy
assistance activities authorized under the Cuban Liberty and Democratic
Solidarity Act, punishable with prison terms of up to 20 years. Tactics
for suppressing dissent include surveillance, arbitrary arrests,
detentions, travel restrictions, exile, criminal prosecutions, and loss of
employment. Neighborhood committees (known as Committees for the Defense
of the Revolution) monitor residents' activities; those identified as
dissidents are subject to intimidation (acts of repudiation), including
psychological and physical violence. Independent groups, dissidents, and
activists face constant harassment and infiltration by Cuban government
agents. In 2003, the Cuban government arrested and sentenced 75 leading
dissidents and activists to terms of up to 28 years in prison.12 The Cuban
government accused some of these individuals of receiving assistance from
USAID grantees. A Cuban human rights group known as Damas de Blanco
(Ladies in White), formed after the 2003 crackdown, consists of
dissidents' wives, mothers, and sisters who peacefully protest for the
unconditional release of political prisoners.

There is no free press in Cuba, and independent journalists are harassed
and imprisoned.13 The Cuban government also substantially restricts and
controls the flow of information, routinely monitoring international and
domestic telephone calls and fax transmissions. As of 2006, only about
200,000 Cubans out of a total population of 11 million had been granted
official access to the Internet.14 The use of satellite dishes, radio
antennas, fax machines, and cellular telephones is restricted due to high
costs, laws, and the threat of confiscation. The customs service also
routinely monitors mail, freight shipments, and visitors' baggage for
materials with political content. Further, the government routinely jams
all external, non-Cuban broadcasts, including the U.S.
government-supported Radio and TV Marti broadcasts.

11By agreement with the Cuban government, USINT is limited to 51 U.S.
personnel. These officials are supported by more than 200 Cuban contract
employees.

12As of August 2006, about 60 of the 75 dissidents remained in prison.
According to State officials, several of those released conditionally from
prison went into exile.

13Reporters Without Borders' Annual Worldwide Press Freedom Index for 2006
ranked Cuba 165th out of 168 countries--just below China and Burma and
just ahead of Eritrea, Turkmenistan, and North Korea.

Commission Recommends Increased Assistance and Identifies U.S. Objectives

The Commission for Assistance to a Free Cuba was established by the
President to identify measures to help end the Castro dictatorship and
identify U.S. programs that could assist an ensuing transition. The
commission's May 2004 report15 recommended providing an additional $36
million to USAID, State, and other agencies' grant programs supporting
Cuban civil society, as well as $5 million for worldwide public diplomacy
initiatives. The report also recommended the creation of a transition
coordinator for Cuba at State, a post created and filled in 2005.

The commission's July 2006 report16 recommended providing $80 million over
2 years to increase support for Cuban civil society, disseminate
uncensored information to Cuba, expand international awareness of
conditions in Cuba, and help realize a democratic transition. The report
also recommended subsequent annual funding of at least $20 million until
the end of the Castro regime. These funds would be in addition to current
funding for State and USAID democracy assistance programs and Radio and TV
Marti.17

State and USAID officials said that the commission's 2004 report provides
the policy framework for their agencies' respective grant programs (see
table 1).

14Reporters Without Borders' October 2006 report Going Online In Cuba:
Internet under Surveillance said that Cuba is one of the world's most
backwards countries regarding Internet usage--with less than 2 percent of
its population online--and that Cuban authorities have implemented an
unjustified system of control and surveillance over Internet use.

15Commission for Assistance to a Free Cuba, Report to the President
(Washington, D.C.: May 2004).

16Commission for Assistance to a Free Cuba, Report to the President
(Washington, D.C.: July 2006).

17The President's 2007 budget requests $36 million for Radio and TV Marti,
both of which broadcast Spanish-language news and current affairs
programming to Cuba.

Table 1: U.S. Policy Framework Identified in the Commission for Assistance
to a Free Cuba's 2004 Report

Strategies                                                                 
      o Empower Cuban civil society                                           
      o Break the Cuban dictatorship's information blockade                   
      o Deny resources to the dictatorship                                    
      o Illuminate the reality of Castro's Cuba                               
      o Encourage international diplomatic efforts to support civil society   
      and challenge the Castro regime                                         
      o Undermine the regime's succession strategy                            

Source: The Commission for Assistance to a Free Cuba's May 2004 report to
the President.

U.S. Assistance Supports Civil Society; Most Awards Were Based on Unsolicited
Proposals

State and USAID lead interagency efforts to provide democracy assistance
to independent civil society groups and individuals in Cuba. However, we
found weaknesses in the communications between State and USAID regarding
the implementation of this assistance. State and USAID made awards to
three types of grantees: Cuba-specific NGOs, NGOs with a worldwide or
regional focus, and universities. Prior to 2004, all USAID awards were
based on unsolicited proposals. In 2004-2005, USAID and State used a
competitive process to select grantees. Since the program's inception,
USAID extended the amount and length of about two-thirds of the 40 grants
and cooperative agreements it awarded.

State- and USAID-Led Interagency Process Implements U.S. Assistance

Since 1996, State and USAID have led the implementation of U.S. democracy
assistance focused on Cuba. We observed weaknesses in communication
between responsible State and USAID bureaus and offices.

State's Office of Cuban Affairs (under the Bureau of Western Hemisphere
Affairs) and USAID's Cuba program office (under the Latin America and
Caribbean Bureau) have led the implementation of assistance programs that
support the development of democratic civil society in Cuba, coordinating
their activities primarily through an interagency working group. This
working group also includes representatives from the National Security
Council, Commerce (Bureau of Industry and Security, Foreign Policy
Controls Division), and Treasury (Office of Foreign Assets Control).18

USAID has funded democracy assistance grants and cooperative agreements
for Cuba since 1996. USAID's Cuba program is overseen by a director and
one junior officer. In 2005, State initiated a grant program for Cuba
democracy assistance through DRL. Headed by an assistant secretary, DRL
leads U.S. efforts to promote democracy, protect human rights and
international religious freedom, and advance labor rights globally. The
Director of U.S. Foreign Assistance (who serves concurrently as the USAID
Administrator) is responsible for coordinating State and USAID democracy
assistance worldwide, with continued participation in program planning,
implementation, and oversight from the various bureaus and offices within
State and USAID, and is developing a strategic framework and procedures to
ensure that programs match priorities.

Table 2 outlines the roles and responsibilities of key executive branch
agencies in providing democracy assistance to Cuba.

Table 2: Key Roles and Responsibilities for U.S. Democracy Assistance for
Cuba

Organization/location             Roles/responsibilities                   
Interagency Working Group                                                  
State and USAID, co-chairs           o Provides overall policy direction   
Washington, D.C.                     o Reviews unsolicited USAID           
                                        assistance proposals and makes award  
                                        recommendations                       
State                                                                      
DRL                                                                        
Office for the Promotion of Human    o Recommends State grant awards       
Rights and Democracy Washington,     o Monitors the implementation of      
D.C.                                 State grants                          
Bureau of Western Hemisphere                                               
Affairs                                                                    
Office of Cuban Affairs              o Co-chairs interagency working group 
Washington, D.C.                     on Cuba                               
                                        o Provides policy guidance            
                                        o Reviews State and USAID assistance  
                                        proposals                             
                                        o Principal liaison within State for  
                                        USAID program                         
USINT Havana, Cuba                   o Provides information on conditions  
                                        in Cuba                               
                                        o Reviews State and USAID assistance  
                                        proposals                             
                                        o Delivers some assistance to         
                                        independent groups and individuals in 
                                        Cuba, including assistance provided   
                                        by USAID- and State-funded grantees   
                                        o Conducts a range of other public    
                                        diplomacy initiatives                 
Cuba Transition Coordinator          o Facilitates implementation of       
Washington, D.C.                     pro-democracy, civil-society          
                                        building, and public diplomacy        
                                        projects                              
                                        o Continues regular planning for      
                                        future transition assistance          
                                        contingencies                         
                                        o Coordinates the implementation of   
                                        overall policy and programmatic       
                                        direction                             
USAID                                                                      
Latin America and Caribbean                                                
Bureau                                                                     
Cuba Program Office Washington,      o Co-chairs interagency working group 
D.C.                                 on Cuba                               
                                        o Recommends USAID Cuba democracy     
                                        assistance awards                     
                                        o Monitors the implementation of      
                                        USAID grants and cooperative          
                                        agreements                            
                                        o Reviews State assistance proposals  

18Organizations that receive federal funds to provide assistance in Cuba
must comply with regulations administered by Treasury and Commerce.
Treasury and Commerce officials review assistance proposals, provide
guidance on U.S. export and asset control regulations, and issue licenses
to State and USAID grantees.

Source: GAO analysis of State, USAID, and other records.

Note: DRL reorganized in June 2006. State's Cuba democracy assistance
program now falls under the new Office of Asia and Western Hemisphere.

As the table shows, USINT plays an important role in implementing State
and USAID democracy assistance focused on Cuba. In addition to these
tasks, USINT administers immigration and refugee programs, maintains
regular contact with Cuban activists and other embassy officials, and
files reports regarding human rights abuses.

Effective internal control requires effective communication with key
stakeholders who have a significant impact on whether an agency achieves
its goals.19 However, during our fieldwork in Havana and Washington, D.C.,
we found that communications were sometimes ineffective between State
bureaus and offices, USINT, and USAID regarding the implementation of U.S.
democracy assistance focused on Cuba. Most critically (given that USAID
does not have staff in Cuba and the Cuba program office staff cannot visit
the island), routine communication links between USAID and USINT had not
been established. Specific examples include the following:

19GAO, Standards for Internal Control in the Federal Government,
[47]GAO/AIMD-00-21 .3.1 (Washington, D.C.: Nov. 1999), p. 19.

           o USAID did not receive reports prepared by USINT assessing some
           independent NGOs in Havana, although some of these organizations
           received assistance from USAID grantees. These reports summarize
           the observations made during USINT site visits and also
           recommended adjustments in the level and type of assistance
           distributed to individual NGOs. Given the lack of a USAID presence
           in Cuba, information provided in these reports would improve USAID
           officials' knowledge of how some assistance is being utilized.
           o USAID's Cuba program director did not participate in the
           evaluation and ranking of democracy assistance proposals submitted
           to State's DRL. (He had an opportunity to provide comments after
           State's review panel had met.) The director said that he
           potentially could have provided important "lessons learned" about
           these proposals, based on almost a decade of experience
           implementing assistance in Cuba. State officials said that the
           omission of the USAID Cuba program director from the technical
           review panels was an oversight and that DRL would take steps to
           ensure USAID's participation on future Cuba panels.
           o USINT officials said that they received limited information from
           USAID about its grantees' on-island activities, such as specific
           groups or individuals receiving U.S. support. The information
           these officials had about such matters was based on direct contact
           with some grantees and comments from dissidents. More complete
           information about grantee activities would provide a basis for
           USINT to monitor and report more systematically on groups and
           individuals receiving U.S. assistance.
           o USINT officials said that they had little advance knowledge of
           the types and amounts of assistance that USAID grantees expected
           them to distribute. In addition, they said that some
           grantee-provided books and other materials had been inappropriate
           or ill-suited for promoting democracy in Cuba.20 These officials
           stated that U.S. assistance would be more effective if they had
           more advance information about--and input into--grantee shipments.
           USAID officials agreed that better communication is needed to
           coordinate these activities.

           In commenting on this report, State and USAID officials recognized
           the benefits of improved interagency communication on Cuba
           democracy assistance and noted that they were taking steps in this
           direction, such as providing USAID program officials with access
           to classified communications between State and USINT. According to
           the USAID Cuba program director, access to classified
           communications should allow better coordination with USINT on
           grantee shipments to the island. In addition, State said that DRL,
           the Bureau of Western Hemisphere Affairs, the Office of the Cuba
           Transition Coordinator, and USAID would meet regularly to share
           information gathered in quarterly meetings with grantees. USAID
           officials commented that including the Cuba program office in
           interagency working groups and weekly staff meetings of State's
           Cuba desk would improve operational coordination. Including the
           Cuba program office in communications between USINT and grantees
           also would benefit USAID grantee oversight and management.
			  
			  U.S. Assistance Is Intended to Support the Development of Cuban
			  Civil Society

           USAID and State democracy assistance generally aims to support
           independent civil society groups and individuals in Cuba. The 1992
           and 1996 acts authorized support for individuals and independent
           NGOs in Cuba, such as sending humanitarian assistance to victims
           of political repression and their families; providing material and
           other support; sending books and other information; and supporting
           visits and the permanent deployment of independent human-rights
           monitors. The USAID Cuba program's strategic objective is "to help
           build civil society in Cuba by increasing the flow of accurate
           information on democracy, human rights, and free enterprise to,
           from, and within Cuba." Table 3 summarizes the DRL, USINT, and
           USAID program activities for democracy assistance targeted at
           Cuba.

           Table 3: State and USAID Program Activities for Cuba Democracy
           Assistance

           Source: GAO analysis of State and USAID records.

           Note: DRL reorganized in June 2006. State's Cuba democracy
           assistance program now falls under the new Office of Asia and
           Western Hemisphere.
			  
			  USAID and State Made Awards to Three Types of Grantees

           In implementing their program objectives, State and USAID awarded
           44 grants and cooperative agreements from 1996-200521 to 34
           grantees in three categories:

           o Cuba-specific NGOs received awards totaling $37.3 million (about
           51 percent of the total value of the awards);
           o NGOs with a worldwide or regional focus received awards totaling
           $28.7 million (about 39 percent of the total value of the awards);
           and
           o Universities received awards totaling about $7.6 million (about
           10 percent of the total value of the awards).

           All 34 grantees are U.S.-based, and most are located in
           Washington, D.C., or Florida. Table 4 summarizes State and USAID
           awards from 1996-2005.

20In some cases, USINT officials declined to distribute such books and
materials, according to State and USAID officials. In March 2001, State's
Office of Inspector General reported similar problems with grantee
shipments to USINT. See State's Office of Inspector General, Inspection of
U.S. Interests Section, Havana, Cuba, Report Number 01-FP-R-020
(Washington, D.C.: Mar. 2001).

State                                                                      
DRL--Office for the Promotion of Human Rights and Democracy                
      o Support human rights and democracy; increase the flow of information  
      on Cuba's transition to a market-based economy and democracy.           
      o Support democracy-building by women.                                  
      o Support democracy and civil society organizations in the Afro-Cuban   
      community.                                                              
      o Reach out to disaffected youth.                                       
      o Support NGO training to promote the peaceful transition to democracy. 
      o Provide communications and office equipment to civil society groups.  
      o Strengthen and expand independent libraries and promote solidarity    
      with international library associations.                                
      o Promote independent labor organization membership and development;    
      facilitate international contacts.                                      
USINT, Havana, Cuba                                                        
      o Maintain regular contact with civil society activists, including      
      independent journalists and librarians, human rights activists, wives   
      of political prisoners, and political activists.                        
      o Broadly distribute books, magazines, newspapers, news clips, videos,  
      pamphlets, radios, and other equipment to Cubans willing to receive     
      them.                                                                   
      o Produce more printed material to reduce dependence on unpredictable   
      supply lines.                                                           
      o Facilitate printing and distribution of information produced by civil 
      society.                                                                
      o Provide Internet access and opportunities for long-distance           
      communications for Cuban civil society.                                 
      o Develop, support, and execute training and long-distance exchange     
      programs for members of Cuban civil society.                            
      o Encourage international media and third-country diplomats to increase 
      their interaction with Cuban civil society and their reporting of human 
      rights and other issues.                                                
      o Facilitate interaction between members of Cuban civil society and     
      civil society organizations in the United States and elsewhere.         
      o Help improve Radio/TV Marti programming.                              
USAID                                                                      
Latin America and Caribbean Bureau--Cuba Program Office                    
      o Build solidarity with human rights activists by providing moral       
      support, information, and non-financial material assistance (including  
      laptop computers, printers, fax machines, short-wave radios and food    
      and medicine).                                                          
      o Give voice to independent journalists by publishing their reports on  
      the internet for dissemination worldwide, providing the Cuban people    
      with hard copies of their reports, and providing training and           
      (non-financial) material assistance.                                    
      o Defend workers' rights by alerting the international community to     
      Cuban government actions in violation of international standards        
      protecting labor rights.                                                
      o Help develop independent NGOs by providing them with information,     
      training, and (non-financial) material assistance.                      
      o Provide direct outreach to the Cuban people by providing newsletters, 
      books, and other informational materials.                               
      o Plan for transition by holding conferences and publishing studies.    

USAID and State Made Awards to Three Types of Grantees

21In 2000, USAID also awarded PricewaterhouseCoopers $163,000 to evaluate
its Cuba program.

Table 4: State and USAID Cuba Democracy Assistance Grantees and Awards,
1996-2005

Dollars in millions
                             USAID             State              Total
                                Awards             Awards            Awards
Type of             No. of             No. of            No. of            
organization         orgs.  No.  Amt.   orgs.  No. Amt.   orgs.  No.  Amt. 
Cuba-specific NGO       12   17 $37.3       -    -    -      12   17 $37.3 
Regional or                                                                
worldwide NGO           12   14  20.5       4    4 $8.1      14   18  28.7 
University               8    9   7.6       -    -    -       8    9   7.6 
Total                   32   40 $65.4       4    4 $8.1      34   44 $73.6 

Source: GAO analysis of State and USAID records.

Note: Total for number of organizations does not add because two grantees
received awards from both USAID and State.

Some of the NGOs with a worldwide or regional focus have a relatively long
history working on Cuba issues. In some cases, these NGOs have received
grants from NED. From 1984-2005, NED awarded 158 grants totaling $13.3
million for democracy assistance for Cuba. Established by Congress in
1983,22 NED is a private nonprofit corporation with the purpose of
encouraging and supporting activities that promote democracy around the
world. As part of its global grants program for "opening dictatorial
systems," NED assistance to Cuba has focused on providing aid to
journalists, independent workers' organizations, and cooperatives, while
maintaining exile-based programs that defend human rights, provide
uncensored information, and encourage dialogue about a country's political
future. NED's independent governing board makes decisions about which
assistance proposals the organization funds. In 2005, using a $3 million
grant from DRL, NED funded 16 Cuba-related grants totaling about $2.2
million. (Four of the 16 grantees also have active USAID grants for Cuba
democracy assistance.)

Grantee Selection Was Based on Unsolicited Proposals until 2004

Our analysis showed that about 95 percent ($61.9 million) of USAID's total
awards were made in response to unsolicited proposals. From 1996-2004,
USAID made 34 awards ($54.7 million) based on unsolicited proposals. The
unsolicited proposals were evaluated by the interagency working group (see
table 2). In 2004-2005, USAID made 5 awards ($3.5 million) based on two
requests for applications (RFA). The proposals received in response to
these RFAs were evaluated and ranked by two technical evaluation
committees that included State and USAID officials. In 2005, USAID also
made an additional award to a previous grantee for $7.2 million based on
an unsolicited proposal. The USAID Assistant Administrator for Latin
America and the Caribbean authorized the negotiation of awards for both
unsolicited and solicited proposals. All awards ultimately were approved
by an agreement officer in USAID's Office of Acquisition and Assistance.

22National Endowment for Democracy Act, Pub. L. No. 98-164, Tit. V, 22 USC
4411-4416.

In keeping with the Federal Grant and Cooperative Agreement Act,23 USAID
policy encourages competitive awards for grants and cooperative agreements
in most circumstances so that the agency can identify and fund the best
projects to achieve program objectives.24 USAID's general policy is to
award all grants and cooperative agreements competitively, seeking
applications from all eligible and qualified entities. However, USAID
policy permits funding unsolicited proposals (without the benefit of
competition) when certain criteria are met. For example, an unsolicited
proposal may be funded if USAID did not solicit the proposal and it
presents a unique or innovative approach, fully supports U.S. development
priorities, and demonstrates a unique capacity for the applicant to carry
out program activities. In such cases, USAID guidance requires that
officials explain the circumstances that justify funding these
proposals.25 The USAID Cuba program director told us that the interagency
working group (see table 2) had opposed prior attempts to employ a
competitive process for selecting grantees.

USAID's successful use of competitive solicitations for some awards in
2004-2005 suggests that the Cuba program could have employed this
selection strategy for at least some prior awards. A total of 27 NGOs
responded to USAID's 2004 and 2005 RFAs. USAID's technical evaluation
committees found the proposals submitted by 12 of the 27 applicants
"within the competitive range" of the RFAs, and recommended awarding
cooperative agreements to 6 applicants and asking an additional 6 to
submit (revised) best and final proposals. Eight of the 12 applicants had
not received prior awards for U.S. democracy assistance for Cuba. In
technical comments on this report, USAID officials said that using a
competitive process will not always result in grantees different from
those that would be selected using a noncompetitive process.

23The Federal Grant and Cooperative Agreement Act of 1977 (31 USC
6301-6308) "encourages competition in making grants and cooperative
agreements."

24Our prior work also suggests that competition provides substantial
benefits to the government. See, for example, [48]GAO-02-471 .

25Unsolicited proposals are covered by the "Guide to USAID's Assistance
Application Process and to Submitting Unsolicited Assistance
Applications." In technical comments on this report, USAID noted that one
advantage of using unsolicited proposals is that organizations can submit
proposals at any time.

All four State awards in 2005 ($8.1 million) were made competitively; two
of these awards ($4.5 million) were to USAID Cuba grantees. Proposals
received in response to State's RFA were reviewed and evaluated by two
technical committees (panels) that included officials from State's Western
Hemisphere Affairs, DRL bureaus, USINT; awards were approved by the
Assistant Secretary of State for Democracy, Human Rights and Labor. As
previously discussed, the USAID Cuba program director received copies of
the proposals for comment but did not participate in the technical panels.
In commenting on this report, State officials said that DRL would continue
to the greatest extent possible to use a competitive process for Cuba
grants. State officials also said that DRL's standard practice is to
solicit participation by USAID and the appropriate regional bureau on all
its evaluation panels, and that they will ensure that this policy is
followed on future Cuba panels.

Agreements Often Modified to Increase Funding and Extend Completion Dates

Our analysis showed that USAID modified 28 of the 40 agreements awarded
between 1996 and 2005 to increase funding, extend program completion
dates, or both.26 In several cases, these modifications substantially
altered grantees' project objectives.27 These modifications increased the
aggregate value of these agreements nearly eight-fold--from about $5.9
million to nearly $50.1 million--and extended the program completion dates
by an average of about 3 years. Between November 1997 and May 2006, USAID
had modified 12 agreements that we reviewed in detail (see fig. 1). These
modifications increased the aggregate value of these agreements from about
$4.8 million to nearly $42.3 million and extended the program completion
dates by an average of about 4.6 years.

26USAID modified 17 agreements to increase funding and extend completion
dates and 11 agreements to extend completion dates. Some agreements were
modified several times.

27USAID guidance permits a change of program objectives when modifications
are used to develop an ongoing relationship with a grantee.

Figure 1: Modifications in Total Authorized Length and Amount for 12 USAID
Cuba Democracy Assistance Agreements, November 1997 to May 2006

USAID policy requires that some modifications and extensions be justified,
such as those that extend the life of the award and simultaneously either
increase the total estimated amount of the award or change the program
description. Officials must explain why the benefits of continuing the
assistance activity with the same grantee exceed the benefits of a
competitive process favored by law and agency policy. USAID Cuba program
officials stated that they modified existing agreements (rather than
initiating new ones) to prevent disruption of assistance programs.28
Additionally, officials said that they wanted to avoid the administrative
burdens associated with awarding new grants or cooperative agreements.
However, USAID procurement officials told us that, whether modifying an
existing agreement or making a new noncompetitive award to the same
grantee, a similar amount of work is required.29 These officials also
identified several advantages to closing out awards and making new ones.
Following established closeout procedures, for example, provides
additional assurance that grantee expenditures to date have been
appropriate, and end-of-project reports provide important information
about project accomplishments and failings to date. As discussed in a
following section, the Cuba program office has decided to require grantees
to submit interim evaluations when requesting significant project
modifications or extensions.

Grantees Provided Assistance and Information to Recipients Using Several
Methods; USINT Played Active Role

USAID reports that its grantees have provided a wide range of
democracy-related assistance since the Cuba program's inception. In 2005,
the 10 grantees that we reviewed delivered humanitarian and material
assistance, training, and information to Cuba. In addition, several of
these grantees worked to increase international awareness of the Cuban
regime's human rights record; others planned for a democratic transition
in Cuba. Recipients of U.S. humanitarian and material assistance,
training, and information included human rights activists, political
dissidents, independent librarians, journalists, and political prisoners
and their families. Grantees employed several methods to deliver these
items to the island. According to grantees and U.S. officials, these
methods involve different security, flexibility, and cost considerations.
Increasingly since 2000, USINT has distributed some grantee-funded
assistance directly. USINT also provides information, electronic
equipment, and other support to Cubans using its own funding.

28In technical comments on this report, USAID officials said that, in some
cases, justifications can be quite broad, because USAID has the authority
to cite impairment of foreign assistance objectives. According to these
officials, all modifications and extensions were appropriately justified
and cleared through the interagency review process.

29In technical comments on this report, USAID officials said that the work
associated with conducting a competitive process is more intensive and
lengthy than a noncompetitive process, but confirmed that the
justification and approval processes supporting either noncompetitive
awards or noncompetitive extensions of existing awards are similar.

U.S. Democracy-Related Assistance Since 1996

According to data provided by USAID, from 1996 to 2006 the Cuba program
provided the following assistance: 385,000 pounds of medicines, food, and
clothing; more than 23,000 shortwave radios; and millions of books,
newsletters, and other informational materials. In addition, USAID
reported that U.S. assistance supported journalism correspondence courses
for more than 200 Cubans, the publication of about 23,000 reports by
independent Cuban journalists about conditions or events in Cuba, and
visits to Cuba by more than 200 international experts to help train and
develop independent NGOs.

Dissidents we interviewed in Cuba said that they appreciated the range and
types of U.S. democracy assistance, that this assistance was useful in
their work, and that this aid demonstrated the U.S. government's
commitment to democracy in Cuba. Dissidents said they appreciate the moral
support that U.S. assistance provides, and that this aid enhanced their
ability to continue their pro-democracy work.

Grantees Provided Four Types of Assistance in 2005

In 2005, the 10 grantees we reviewed reported activities in four
categories: (1) providing humanitarian and material assistance and
training to independent civil society groups and individuals; (2)
disseminating uncensored information to, within, and from Cuba; (3)
increasing international criticism of the Cuban regime by highlighting its
human and workers' rights violations; and (4) planning for a future
transition to democracy by sponsoring conferences and publishing studies.
Our analysis of quarterly reports and other records show that these
grantees provided substantial assistance in 2005 (see table 5).

Table 5: Assistance to Individuals and Groups in Cuba in 2005

Category       Reported assistance        Description                      
Humanitariana     o About 115,000 pounds     o Food included canned and    
                     of food, medicine,         dried goods such as soups,    
                     clothing, and other        tuna, bouillon, and powdered  
                     assistance                 milk.                         
                     o Unspecified amounts      o Medicines included          
                     of other humanitarian      over-the-counter pain relief  
                     aid, such as assistance    medication, antacids, and     
                     for hurricane victims      vitamins.                     
                                                o Clothing, which sometimes   
                                                was donated or used, included 
                                                blue jeans, T-shirts,         
                                                underwear, and sandals.       
Materialb         o About 4,900 shortwave    o Shortwave radio kits were   
                     radios                     powered by rechargeable       
                     o About 27 DVD players     batteries, solar cells, or    
                     o About 13                 other methods.                
                     copier/printer/fax         o Office supplies included    
                     machines                   notebooks, paper, printer     
                     o Video recorders and      cartridges, pencils, and      
                     cameras                    pens.                         
                     o Office supplies          o Other items included video  
                     o About 200 flashlights    game players, key chains, and 
                                                holiday post cards.           
Training       Thirteen exchange visits      o One grantee provided        
                  to the United States          materials and training on     
                                                documenting labor rights      
                  Six training seminars in      abuses and filing claims to   
                  Cuba                          labor rights organizations,   
                                                for example.                  
                  Technical and other           o One grantee provided        
                  assistance, such as           leadership and management     
                  computer and business         training for activists.       
                  training                                                    
Uncensored        o About 100,400 books,     o Books in Spanish included   
information       magazines, and other       Como Llego la Noche (How the  
                     reading materials          Night Arrived), by Huber      
                     o About 1.1 million        Matos; La Fiesta del Chivo    
                     newsletters and            (The Feast of the Goat), by   
                     pamphlets                  Mario Vargas Llosa; El Poder  
                     o About 11,600 DVDs and    de los Sin Poder (Power of    
                     CDs                        the Powerless), by Vaclav     
                     o 13 Web sites             Havel; and children's reading 
                                                and coloring books.           
                             o One grantee      o Grantees also published     
                             reported more      books on Cuba written by      
                             than 4.4           Cuban activists, such as Vive 
                             million average    Boitel (Boitel Lives), by     
                             monthly hits by    Jorge Luis Garcia Perez; and  
                             more than          Ojos Abiertos (Eyes Open), a  
                             390,000 users      collection of literature,     
                             o One grantee      poetry, and art by Cuban      
                             reported an        writers and artists           
                             average of         participating in a literary   
                             about 57,000       contest.                      
                             monthly hits by    o Topics included peaceful    
                             more than          democratic activism, Cuban    
                             11,500 users       and U.S. society and history, 
                                                international politics, and   
                     o Daily, weekly, and       transitions to a free market  
                     monthly e-mails            economy. Dissidents and       
                     containing news,           others in Cuba said that The  
                     research studies, and      Da Vinci Code and Harry       
                     other informationc         Potter titles currently are   
                     o Regular communication    two favorites of adults and   
                     by telephone, fax,         children.                     
                     Internet/e-mail and        o Magazines contained news    
                     maild                      and opinion articles written  
                     o Radio/TV programs and    by Cuba- and Miami-based      
                     interviews, including      activists.                    
                     for Radio Marti and        o Newsletters and pamphlets   
                     Radio Republica.           summarized international and  
                                                Cuba-specific news, events in 
                                                Cuba, and other issues.       
                                                o Grantees regularly updated  
                                                Web sites with news and       
                                                opinion pieces, links, and    
                                                other information.            
                                                o DVDs included recordings of 
                                                Radio Marti, grantee-produced 
                                                talk shows, recordings of     
                                                political prisoners' trials,  
                                                and American children's       
                                                movies. CDs included          
                                                recordings of Cuban-American  
                                                music.                        
                                                o Radio program content       
                                                included music, news analysis 
                                                and commentary, and recorded  
                                                call-in programs.             

Source: GAO analysis of 10 grantees' quarterly reports submitted to USAID
and State, and other records.

aQuantities include humanitarian assistance reported in pounds. In
addition, some grantees reported the quantity or the value of items
sent--for example, one grantee reported shipping approximately $4,500
worth of humanitarian aid.

bQuantities of items as reported. In some cases, grantees did not specify
quantities of items sent to Cuba. For example, one grantee reported that
individuals delivered "modest amounts of equipment."

cGrantees' e-mail distribution lists ranged in size from about 1,500
subscribers in the United States, Cuba and other countries, to tens of
thousands of e-mail addresses in Cuba.

dOne grantee reported an increase in Internet communication following the
opening of USINT's computer labs in Havana.

In technical comments on this report, USAID officials said that the
purpose for providing novels, video games, children's coloring books, and
some other items listed in table 5 is to attract Cubans to independent
libraries and other organizations so that they can review other materials
on democracy, free markets, and other subjects.

Eight grantees also reported conducting international outreach and
advocating for human and workers' rights causes in Cuba (either directly
or through subgrantees). Our analysis of quarterly reports shows that
these grantees were involved in organizing or participating in the
following types of activities in 2005:

           o conferences and meetings held by groups such as the United
           Nations Human Rights Commission in Geneva, Switzerland, and the
           Organization of American States General Assembly, in Ft.
           Lauderdale, Florida;
           o meetings with foreign government and political leaders to
           discuss human and workers' rights in Cuba and possible support for
           activists;
           o conferences and meetings of civil society groups;
           o press conferences, news releases, and other events related to
           human rights; and
           o mail, e-mail, and letters distributed to foreign government
           officials.

           One grantee was primarily focused on planning for a democratic
           transition. This grantee reported that it commissioned academic
           studies, compiled databases, and organized seminars in the United
           States and a Latin American country. These resources were made
           available in print and online.
			  
			  Recipients of U.S. Assistance Included a Range of Cuban Civil
			  Society Groups

           Our analysis of quarterly reports and other records shows that the
           recipients of U.S. assistance in 2005 included political prisoners
           and their families, independent librarians, journalists, political
           parties, labor organizations, other civil society groups and
           activists, and, to a lesser extent, the general Cuban public (see
           table 6).

Recipients of U.S. Assistance Included a Range of Cuban Civil Society Groups

Table 6: Recipients of U.S. Democracy Assistance in Cuba in 2005

Recipient               Reported assistance                                
Political prisoners and    o Six grantees sent humanitarian assistance and 
their families             other support to political prisoners and their  
                              families.                                       
                              o The Cuban Commission for Human Rights and     
                              National Reconciliation estimates there are     
                              about 300 political prisoners in Cuba,          
                              including about 60 of the 75 activists and      
                              dissidents arrested during the 2003 crackdown.  
Independent libraries      o Eight grantees supported independent          
                              libraries throughout Cuba.                      
                              o Libraries typically are located in activists' 
                              homes, civic groups, and religious community    
                              centers; they provide space for adults and      
                              children to read, hold discussions, watch       
                              television and movies, play games, draw and     
                              paint.                                          
Independent journalists    o One grantee focused on providing assistance   
                              to independent journalists.                     
                              o Other grantees may provide assistance to      
                              independent journalists who are also            
                              independent librarians or family members of     
                              political prisoners.                            
                              o One grantee reported that an average of about 
                              30 independent journalists submit news and      
                              opinion articles and photos for publication     
                              online or in print.                             
Independent political      o Five grantees sent assistance to leaders of   
parties                    various political parties in Cuba.              
                              o Although the Cuban Communist Party is the     
                              only official political party in Cuba, a number 
                              of unofficial, independent political parties    
                              also exist.                                     
Independent labor          o One grantee focused on supporting independent 
organizations              workers' rights organizations in Cuba. Three    
                              other grantees also reported supporting these   
                              groups.                                         
                              o The Cuban government permits only one legal   
                              labor organization, the Confederation of Cuban  
                              Workers.                                        
Other independent civil    o Five grantees sent materials and training to  
society groups and         civic groups, religious centers, Cuban writers' 
activists                  and artists' groups, human rights groups, and   
                              other professional organizations.               
Cuban public               o Five grantees sent information directly to    
                              the Cuban public via Internet sites, e-mails,   
                              and radio broadcasts.                           
                              o Grantees generally did not estimate how much  
                              of the population received assistance through   
                              redistribution via independent organizations.   

Source: GAO analysis of 10 grantees' quarterly reports submitted to USAID
and other records.

Note: Individuals may be a member of more than one group--for example, the
spouse of a political prisoner might also be an independent librarian or
journalist.

According to USINT officials, recipients sometimes give away or sell
books, magazines, newspapers, or other assistance. According to senior
USINT officials, these actions may have the unintended effect of expanding
the reach of U.S. assistance. Senior U.S. officials viewed these losses
due to confiscation or reselling as an unavoidable cost of providing
democracy assistance in Cuba's repressive political and economic
environment. However, in technical comments on this report, USAID
officials said that, despite potential benefits of expanding the reach of
US assistance, selling such assistance is not allowed under USAID policy.
USAID recently sent an e-mail to its grantees reminding them that they are
forbidden to sell or knowingly condone the selling of humanitarian aid or
other assistance by recipients.

Several Methods Used to Deliver U.S. Assistance

The grantees in our sample reported using several methods to deliver
humanitarian aid and material assistance, training, and informational
materials to Cuba. Grantees and U.S. officials said that these methods
involved different security, flexibility, and cost considerations. For
example, the estimated cost of delivering humanitarian or material
assistance to the island ranged from about $4 to $20 per pound.

Some grantees have taken steps to reduce the risk of loss--due to theft or
confiscation by the Cuban government--of assistance shipped to Cuba.
Dissidents we interviewed in Havana said that the assistance they received
from USAID and State grantees (and other organizations) was sometimes
interrupted. In addition, USAID officials said that the Cuban government
closed some independent libraries and confiscated their books and
equipment in 2005.

We plan to issue a classified version of this report that would provide
additional information about the methods used to deliver U.S. assistance
to Cuba, steps taken to reduce losses of assistance shipped to the island,
and some of the recipients of U.S. assistance in Cuba.

USINT Delivers Some Grantee and Other Assistance

USINT data shows that it delivers assistance and information to more than
2,500 individuals and groups in Cuba. In 2005, for example, the office
distributed over 269,000 books, magazines, articles, pamphlets, and other
materials. According to U.S. officials, USINT's role delivering democracy
assistance has increased since 2000--as indicated by the substantial
increase in the volume.30 These officials also said that further expanding
the volume of items distributed would require additional staff and
resources.

The assistance delivered by USINT was funded by State and USAID grantees
as well as by USINT. According to U.S. officials, USINT purchased
materials, equipment, and information, including U.S. national news and
professional magazines, such as the Spanish-language versions of Newsweek,
The Economist, Art in America, The Atlantic, Popular Mechanics, and
Downbeat. In 2004, the office also purchased equipment, materials, and an
electronic subscription allowing it to publish onsite 300 copies of El
Nuevo Herald daily newspaper. USINT also purchased and distributed radios,
laptop computers, and DVD players. Some of this material and information
distributed by USINT is redistributed by individuals and groups to other
locations in Cuba.

30USINT records indicate that the annual volume of shipments increased
between 2000 and 2005 by about 200 percent--from about 51,000 to 155,000
pounds. U.S. officials estimate that equipment, books, and other
assistance materials distributed by USINT made up about 50-70 percent of
the total volume for 2005.

During our fieldwork at USINT, we observed employees unload, sort, and
distribute shipments sent by USAID grantees and one U.S.-based NGO, as
well as items purchased by USINT. Shipments included materials for
independent librarians and journalists, artists, musicians, academics and
teachers, churches, and foreign diplomats. Some of these shipments were
addressed to specific individuals. USINT officials said that they deliver
information directly to some Cuban government officials. USINT officials
also distribute literature and equipment to Cubans visiting the consular
section for visas or other business.

As part of its public diplomacy efforts, USINT provides videoconferencing
capabilities and public Internet access to facilitate the work of State
and USAID grantees. For example, grantees use Internet-based video
conferencing for training sessions. We observed a training session
organized by one USAID grantee for approximately 20 independent
journalists. In addition to the training, the participants said that they
had received other U.S. assistance, such as equipment, supplies, and help
in publishing their stories outside Cuba. USINT also provides public
access to about 20 computers with Internet access, printers, and copiers.
During our fieldwork, we observed that a number of Cuban activists used
these computers. The computers also appeared to be popular with the Cuban
public--reservations for using them were booked for a month in advance,
according to USINT employees managing this equipment.

Additionally, as part of USINT's public diplomacy program, the public
affairs office also compiles and selects daily news clippings and quotes
to display on an electronic billboard news ticker located on USINT's
exterior. This billboard was installed in January 2006 to display
information for people passing the building, which is located on a major
Havana street and pedestrian walkway.

Monitoring and Oversight of Cuba Program Grants Did Not Provide Adequate
Assurance That Funds Were Used Properly

USAID's internal controls over both the awarding of Cuba program grants
and the oversight of grantees do not provide adequate assurance that the
grant funds are being used properly or that grantees are in compliance
with applicable laws and regulations.31 The Guide to Opportunities for
Improving Grant Accountability states that organizations that award grants
need good internal control systems to provide adequate assurance that
funds are properly used and achieve intended results.32 However, we found
some weaknesses in internal control in the preaward, award,
implementation, and closeout phases of Cuba-program grants management.33
The agency's preaward reviews of grantees often were not completed prior
to grant awards, and USAID auditors did not adequately follow up to
correct deficiencies after grant awards. In addition, the standardized
terms and conditions of grants and cooperative agreements lacked the
detail necessary to support adequate accountability; specifically, the
grants and cooperative agreements did not include a requirement for an
acceptable internal control framework, nor did they contain provisions for
correcting deficiencies noted by preaward reviews. USAID's Cuba program
office also does not have adequate policies and procedures for assessing
grantee risks in order to put in place proper procedures to reduce that
risk. In addition, a lack of adequate oversight and monitoring by USAID's
program office allowed for questionable expenditures by grantees to go
undetected; moreover, grantee compliance with cost-sharing provisions was
not adequately addressed. The program office also did not provide adequate
training to grantees and does not appear to routinely follow prescribed
closeout processes. These weaknesses in agency and program office internal
control policies and procedures contributed to internal control
deficiencies we found at 3 of the 10 grantees we reviewed, leaving USAID's
Cuban democracy program at increased risk of fraud, waste, and abuse. We
referred the problems we identified at these 3 grantees to the USAID
Office of Inspector General.

31GAO's Standards for Internal Control in the Federal Government provides
an overall framework for establishing and maintaining internal control,
identifying and addressing major performance and management challenges,
and identifying and addressing areas at the greatest risk of fraud, waste,
and mismanagement. [49]GAO/AIMD-00-21 .3.1 (Washington, D.C.: Nov. 1999).

32A guide compiled by members of the Grant Accountability Project--a
collection of federal, state, and local audit organizations tasked by the
Comptroller General's Domestic Working Group to offer suggestions for
improving grant accountability. See Domestic Working Group, Guide to
Opportunities for Improving Grant Accountability (Oct. 2005), available at
[50]http://www.ignet.gov/randp/rpts1.html .

33In the preaward stage, potential grantees submit applications for agency
review. In the award stage, the agency identifies successful applicants or
legislatively defined grant recipients and awards funding. The
implementation stage, also referred to as the postaward stage, includes
payment processing, agency monitoring, and grantee reporting, which may
include financial and performance information. The closeout phase includes
the preparation of final reports, financial reconciliation, and any
required accounting for property.

USAID's Preaward Processes Were Inadequate

USAID guidance requires grant officers to determine whether the potential
recipient possesses, or has the ability to obtain, the necessary
management competence in planning and carrying out assistance programs,
and whether it practices mutually agreed upon methods of accountability.34

As addressed in the Guide to Opportunities for Improving Grant
Accountability, an effective review performed before the award--which
includes a general review of the control environment and the control
activities in place--helps to detect and correct control weaknesses that
could contribute to potential fraud, waste, and abuse of grant funds. The
potential grantee can then correct these weaknesses before USAID provides
funding. During our site visits, we identified fundamental internal
control weaknesses at three grantees that might have been mitigated if
USAID had performed more timely preaward reviews and performed the
necessary follow-up on findings. (Table 7 lists some examples of the
internal control weaknesses we identified at these three grantees.)

First, in four of the eight instances in which preaward reviews were
conducted, the reviews were completed after the awards were made.35
According to USAID officials, these four reviews were issued from 3-33
days after the award date primarily because of staffing shortages.
However, in technical comments on our report, USAID officials said that
the agreement officer received oral findings from USAID or Defense
Contract Audit Agency auditors before the final report.

34USAID, ADS Chapter 303--Grants and Cooperative Agreements to
Non-Governmental Organizations; Section 303.3.9.1(a), Pre-Award Survey
Requirements.

35Preaward reviews were conducted for 7 of the 10 grantees we reviewed.
One grantee received two preaward reviews. According to a USAID
procurement official, in accordance with agency guidance, preaward reviews
were not conducted for 3 of the 10 grantees because they were
well-established and had done previous business with USAID.

We also identified one preaward review conducted for USAID by the Defense
Contract Audit Agency that appears to have had limitations and weaknesses
in its implementation. This review, dated November 20, 2002, concluded
that one of the three grantees for which we identified fundamental
internal control weaknesses had an adequate accounting system. However,
during our site visit in 2006, this grantee could provide only some paid
invoices and bank statements for transactions before February 2005. These
records were insufficient for tracking and reporting accumulated grantee
expenditures or reconciling bank accounts.

Second, USAID's follow-up on preaward reviews was insufficient to provide
assurance that deficiencies and weaknesses found during the preaward
reviews were adequately addressed. Five of the eight preaward reviews we
assessed made recommendations for correcting deficiencies in the grantees'
accounting systems that could adversely affect grantees' ability to
record, process, summarize, and report direct and indirect costs. However,
the corresponding grants and cooperative agreements did not include
specific provisions for correcting these deficiencies.36 Moreover,
although all eight reviews we assessed recommended follow-up reviews,
USAID did not conduct most of them in a timely fashion. In one case, USAID
did not conduct a follow-up review until 3 years after such a review was
recommended in an initial review. In technical comments on this report,
USAID officials said that in the past there were some instances where
resources for preaward and follow-up reviews were not available, but that
obtaining funding for these reviews is generally a priority for USAID and
the Office of Acquisition and Assistance. USAID officials stated that the
Office of Acquisition and Assistance will work with the Cuba program
office to ensure information regarding grantee audits is communicated to
all appropriate staff in a timely manner and that if any subsequent audits
are necessary, adequate funding will be made available.

36See Office of Management and Budget (OMB) Circular No. A-110, Uniform
Administrative Requirements for Grants and Agreements with Institutions of
Higher Education, Hospitals, and Other Non-Profit Organizations. OMB has
codified A-110 at 2 CFR Pt. 215, and USAID had codified the requirements
of A-110 at 22 CFR Pt. 226.

Grant Agreements Did Not Support Program Accountability

We performed a detailed review of four cooperative agreements and one
grant agreement that USAID signed between 1997 and 2005 for democracy
assistance for Cuba.37 These agreements had a variety of objectives,
ranging from providing humanitarian assistance to dissidents and their
families to providing information about conditions in Cuba to the Cuban
public and the international community. In general, however, the
standardized language of the agreements did not contain sufficient detail
to address the unique objectives of each grant, the grantee's internal
controls, or the remediation of known grantee deficiencies. This increases
the risk that grantees will use program funding, either unintentionally or
intentionally, for purposes that are not intended by the program and that
program assets will not be adequately safeguarded.

According to the Guide to Opportunities for Improving Grant
Accountability, the terms, conditions, and provisions in the award
agreement, if well designed, can render all parties more accountable for
the award. The terms and conditions in the USAID grants and cooperative
agreements we reviewed generally lacked the detail necessary to provide
adequate guidance to grantees. For instance, although providing
humanitarian assistance is a common objective, the agreements provided
insufficient detail for grantees to differentiate between allowable and
unallowable types of such assistance. In addition, rather than providing
guidance in the agreement document, the agreements pointed to additional
sources of rules and regulations, including supporting legislation that
the grantees might have difficultly locating or implementing without
additional guidance. For example, the agreements do not contain details
about acceptable cost-sharing contributions, but instead direct grantees
to the Code of Federal Regulations. The grant agreements we reviewed also
did not include provisions requiring grantees to establish and maintain an
acceptable internal control system or, as previously discussed, provisions
for correcting deficiencies identified during preaward reviews.

37We judgmentally selected these 5 agreements from the 13 USAID agreements
in our sample because they represent a broad range of the types of
objectives outlined by Cuba program grantees. A USAID official confirmed
that all of the agreements use standard language from document-generating
software that is modified periodically under the direction of USAID's
Office of Acquisition and Assistance.

Cuba Program Office Inadequately Monitored and Oversaw Grant Implementation

Internal controls should be designed to provide for ongoing monitoring in
the course of normal operations. We identified several weaknesses in the
USAID Cuba program office's oversight and monitoring of grantees'
implementation of grants and cooperative agreements, including the lack of
policies and procedures for identifying at-risk grantees, formal oversight
of grant implementation, and a framework for monitoring cost sharing. In
addition, the program office provided inadequate training to grantees.
These weaknesses exist in a restrictive environment where the Cuban
government precludes Cuba program officers from directly observing the use
and outcomes of the assistance.

  Policies and Procedures for Mitigating Risks at At-Risk Grantees Are
  Inadequate

The USAID Cuba program office does not have adequate policies and
procedures for assessing and managing the risks associated with specific
grantees. USAID Cuba program officials have not performed a formal risk
assessment of the grantees providing assistance to Cuba, although they
said that they consider recipients of larger awards to be higher risk.
Larger recipients often are subject to the Single Audit Act38 and annual
financial statement audits, and are therefore subject to internal control
and compliance testing. The program director and program office staff said
that they visit grantees at least quarterly. However, one of the grantees
we reviewed said that USAID officials do not conduct formal financial
oversight visits to their office. Visits to large and small grantees were
not formally documented and were not based on structured oversight
procedures. In addition, the USAID program office also performed limited
to no reviews of the financial records for recipients, increasing the risk
that they would operate without effective controls. USAID Cuba program
officials said that if the applicant had a prior history of managing USAID
or U.S. government contracts or grants, USAID contacted the cognizant
USAID or other federal agency technical officer for information about
those awards. For applicants without a prior history of managing such
federal awards, the program office verifies that the applicant had
received 501(c)(3) status from the Internal Revenue Service (IRS).39 USAID
also conducts local inquiries to verify the reputation and qualifications
of the applicant.

38The Single Audit Act (31 USC 7501-7507) is intended to promote sound
financial management, including effective internal controls, for federal
awards administered by state and local governments and nonprofit
organizations. OMB Circular No. A-133, Audits of States, Local
Governments, and Non-Profit Organizations, sets standards related to the
Single Audit Act, including a requirement for organizations that expend
$500,000 or more in federal awards during the fiscal year to have a single
or program-specific audit conducted for that year, including a review of
internal controls.

  USAID Does Not Effectively Monitor Grant Project Implementation

USAID's Cuba program office does not have a formal grantee monitoring and
oversight process to help ensure accountability for grant funds. We found
key weaknesses in the oversight USAID did provide.

First, USAID lacked adequate documentation of the grantees' implementation
plans. Five agreements between USAID and grantees specified that grantees
were to submit implementation plans for approval before initial
disbursements. A USAID official said the plans had been communicated
orally or included in the grantees' initial proposals. However, we found
inadequate documentation in USAID's files to support this. In addition,
some grantees with whom we spoke lacked an understanding of USAID's
requirements for implementation plans. For example, two grantees could not
confirm the existence of implementation plans for their respective grants.

Second, USAID did not require grantees to submit detailed, well-supported
quarterly reports and did not have a formal process for reviewing those
reports. Along with a narrative report, USAID requires grantees to submit
one-page quarterly financial reports (but not supporting documentation) to
validate underlying expenditures. Although grantees provide summary
amounts for expenditures and obligations, the financial information
required by USAID in the quarterly reporting process is not sufficiently
detailed to help the program office identify potentially inappropriate
expenditures. In addition, USAID does not have a formal process for
reviewing this reporting. The lack of formal quarterly review procedures
and documentation reduces USAID's ability to identify and correct
inappropriate expenditures by grantees. In technical comments on this
report, USAID officials said that the Paperwork Reduction Act limits
USAID's ability to require, as a general rule, grantees to report
information in addition to that required under OMB circular A-110 and 22
CFR Part 226 without approval from OMB. USAID officials said that they
will consider pursuing OMB approval.

39501(c)(3) status, which is based on a provision in the Internal Revenue
Code, means that the IRS has reviewed an NGO's application for such status
entitling it to exemption from federal taxation, and has determined that
the NGO meets specified criteria, such as being organized and operated
exclusively for a public purpose (such as charity or education) and not
engaging in prohibited activities (such as lobbying or profit-making).
Because the IRS has already performed a review of an NGO's organization
and operation, USAID can reasonably rely on IRS's prior work and thus
needs to conduct a less comprehensive review using USAID resources.

Third, USAID does not have a protocol for monitoring visits to grantees
and does not document the results of those visits. Our Standards for
Internal Control in the Federal Government addresses the need for
developing and implementing detailed procedures for grantee monitoring.
During our fieldwork, we accompanied USAID Cuba office staff on site
visits to several grantees. During this fieldwork, we observed that USAID
officials did not use a structured review process or coordinate their
reviews to prevent gaps or duplication of efforts. USAID officials did not
prepare trip reports or other written summaries of their observations
during these site visits.40 Some grantees stated that program officials
generally examined only a limited number of invoices during their visits.
One program office staff member said that, during site visits, he
typically spent about an hour interviewing grantee representatives and
reviewing records at each grantee.

  USAID Cuba Office Lacks Framework for Monitoring Cost Sharing

USAID's Cuba program office did not have a framework for overseeing
grantee compliance with cost-sharing requirements in their grants and
cooperative agreements and could not determine whether grantees were
complying with these requirements. Cost sharing, an important element of
the USAID-grant recipient relationship, is applied to certain grantees on
a case-by-case basis. If USAID includes a cost-sharing provision in an
agreement, the respective grantee must finance a specified amount of
activity costs using nonfederal funds. Some agreements allow grantee
contributions to include nonmonetary contributions, such as services and
property, in addition to cash contributions.41

40The USAID program director said that the program office and grantees
were concerned about creating records that might be released under the
Freedom of Information Act, because the release of such information could
damage program activities and/or result in the harassment or imprisonment
of aid recipients in Cuba. However, in technical comments on this report,
USAID officials said that concerns related to protecting sensitive
information have been addressed through the application of Freedom of
Information Act exemptions and, thus, in the future, will not present an
obstacle to recordkeeping.

41OMB Circular No. A-110 provides guidance on cost sharing; USAID has
adopted and codified this guidance with some limited modifications at 22
CFR 226.23. With a few limited exceptions, a grantee receiving federal
dollars under more than one federal grant program may not use the funds
received under a different grant for cost sharing. On this last point, see
GAO, Principles of Federal Appropriations Law (commonly referred to as
"the Redbook"), [51]GAO-06-382SP , at 10.E.4 (3rd ed. Feb. 2006).

Twelve of the 13 USAID agreements we reviewed contained cost-sharing
provisions, totaling about $7.6 million. In some cases, the grantee's cost
share was a significant portion of the total amount of assistance
authorized under the agreement. For example, one grantee's initial share
represented 56 percent of the total estimated program amount. Moreover, as
previously discussed, the cost-sharing provisions we reviewed offered
little guidance about the allowable sources of cost-sharing funds or the
methods for valuing non-monetary contributions applied toward the cost
share, instead directing grantees to the Code of Federal Regulations.42

Grantees are required to periodically report to USAID the amounts they
have spent as their portion of the cost sharing. However, based on a
review of grantee documentation and interviews with agency staff, we
determined that USAID does not systematically monitor grantee compliance
with cost-sharing requirements. For example, staff does not use a work
program or structured methodology to determine whether grantees comply
with cost-sharing provisions in their respective agreements.

Two of the USAID grantees we reviewed reported that they complied with
USAID grant regulations by applying funds received under grants from NED
toward their required share of program costs. USAID grant regulations at
22 CFR 226.23 require grantees to meet their cost-sharing requirement with
nonfederal resources. For the purpose of complying with USAID grant
regulations on cost-sharing requirements, it is unclear whether funds
received under grants from NED constitute federal or nonfederal
resources.43 USAID officials, after consulting with State and NED
officials, have determined that NED funds provided from U.S. government
sources cannot be used by NED grantees to meet required cost-share
contributions under USAID regulations. USAID officials said that they will
address the proper use of NED grant funds provided from U.S. government
sources in relation to existing and future USAID grants.

4222 CFR 226.23 states that cost sharing must meet specific guidelines.
For example, contributions must be verifiable through recipient records,
necessary and reasonable for proper and efficient accomplishment of
project or program objectives, not paid by the government under another
award (except where authorized by federal statute), and provided for in
the approved budget.

43This issue arises because NED is a private, nonprofit corporation
established by statute that receives federal funds to carry out its
activities. Under the NED statute, State is required to make an annual
grant to NED out of specific appropriations to carry out the purposes of
the NED statute. NED is prohibited from carrying out activities directly
and is instead required to fund private-sector initiatives furthering this
purpose. Therefore, NED makes grants to private NGOs, which may at the
same time be USAID grantees.

  USAID Does Not Provide Adequate Training to Grantees

One important role for a grantor program office is the training and
guiding of program grantees, as discussed in the 2005 Guide to
Opportunities for Improving Grant Accountability. However, USAID does not
provide formal grant management training to help grantees understand the
regulations, policies, and procedures governing grant funds.44 According
to USAID officials, limited English proficiency has created additional
challenges for some of the smaller grantees. The Cuba program director
stated that he had wanted to provide formal training to certain grantees,
but was concerned about the grantee reaction to creating training
requirements for some, but not all, grantees. In technical comments on
this report, USAID officials said that although grantees are responsible
for understanding and complying with grant provisions and federal laws and
regulations, USAID will consider providing Spanish language technical
assistance to grantees to build NGO capacity for financial management.
USAID also is pursuing providing grant and regulation information to
grantees in Spanish.

USAID Does Not Appear to Routinely Follow Prescribed Closeout Processes

Closeout processes can be used for identifying problems with grantee
financial management and program operations, accounting for any real and
personal property acquired with federal funds, making upward or downward
adjustments to the federal share of costs, and receiving refunds for
unobligated funds that the grantee is not authorized to retain. USAID did
not provide us with evidence that they routinely performed closeout
processes for some agreements.45 Currently, USAID guidance states that if
a U.S. grantee requires a closeout audit, the Office of Acquisitions and
Assistance must include a closeout audit request in the next regularly
scheduled audit of the organization. In technical comments, USAID
officials said that such audit requests are no longer made because the
agency uses a database system to track whether grantees required to have
closeout audits receive one in accordance with agency policies and
procedures. The Office of Acquisitions and Assistance recognizes that the
current written policy regarding closeout procedures is outdated and is
working to update it.

44The guide states that agency staff and grantees need sufficient training
so that they can understand the regulations, polices, and procedures
governing grant funds. The guide further states that it is essential that
grantees receive such training, particularly small entities unfamiliar
with all of the regulations and policies. See Grant Accountability
Project, Domestic Working Group, Guide to Opportunities for Improving
Grant Accountability (Oct. 2005).

USAID's Weaknesses Contributed to Deficiencies Observed at Three Grantees

During our limited reviews, we identified fundamental internal control
weaknesses at 3 of the 10 grantees that most likely would have been
identified had USAID followed up on weaknesses identified by preaward
reviews. In addition, the lack of adequate oversight and monitoring by
USAID's program office allowed for questionable expenditures by three
grantees to go undetected. Table 7 summarizes the internal control
weaknesses we observed at these grantees.

45According to USAID officials, agency policy for closeout reviews of
U.S.-based grantees depends on whether the grantees are subject to the
Single Audit Act. For grantees subject to this act, USAID verifies that
they file an A-133 report before closing out that grant. For grantees not
subject to this act, the Office of Acquisition and Assistance reviews the
project file and consults with the agreement officer and cognizant
technical officer to determine whether a particular grantee should receive
an audit. Factors considered in making this determination include whether
there have been performance concerns and the benefits and costs of an
audit. USAID guidance instructs agreement officers to "leave open" all
grants with open (unresolved) audit recommendations.

Table 7: Internal Control Standard Deficiencies Observed at Three
Grantees, March-April 2006

Grantee A                 Grantee B                 Grantee C              
Control environment                                                        
      o A poor "tone at the     o Grantee management      o Grantee           
      top" and attitude by      lacks understanding of    management lacks    
      grantee management        the requirements in       understanding of    
      toward maintaining        the grant agreement.      the requirements in 
      adequate financial and                              the grant           
      program records.                                    agreement.          
      o Grantee management                                o Management        
      lacks knowledge that                                indicated that they 
      commingling funds was                               were selling some   
      not authorized under                                inventory items,    
      the program.                                        primarily books     
                                                          meant for           
                                                          distribution in the 
                                                          program, to raise   
                                                          additional revenue. 
Control activities                                                         
      o Significant             o Lack of accounting      o Lack of           
      commingling of funds      records to support        accounting records  
      between the Executive     expenditures. For         to support          
      Director's personal       example, grantee could    expenditures. For   
      bank account, the         not produce expense       example, grantee    
      USAID grant account,      reports or detailed       couldn't provide    
      and the private           listings of expenses      time reports to     
      donations account.        for periods prior to      justify salary      
      o Lack of bank            February 2005.            expenses for some   
      reconciliations and       o Questionable travel     employees.          
      adequate records to       expenses lack adequate    o Questionable      
      support expenditures.     documentation.            expenses paid to    
      o Lack of                 o Lack of                 family member of    
      documentation to          documentation to          grantee manager.    
      determine compliance      determine compliance      o Hundreds of       
      with cost-sharing         with cost-sharing         dollars in petty    
      requirements detailed     requirements detailed     cash was observed   
      in grant agreement.       in grant agreement.       at the grantee's    
      o Recording of time                                 office that was not 
      charges that do not                                 controlled or       
      appear to be logical                                properly secured.   
      or correct.                                                             

Source: GAO analysis of USAID and grantee records.

The 3 grantees discussed in table 7 accounted for about 9 percent ($4.7
million) of the awards received by the 10 grantees we reviewed.46 Two of
the 3 grantees detailed above did not maintain adequate records of the
amount and type of assistance or materials sent to Cuba, the methods and
dates assistance was sent or transmitted, or efforts to verify that
assistance was received. Additionally, these two grantees had not
established systematic procedures for gathering, documenting, and
reporting this information.47

46The 10 grantees we reviewed had 13 USAID Cuba awards totaling almost $50
million, and one State DRL Cuba award of about $2.3 million. We calculated
percentages using the total amount for 14 awards.

47Nevertheless, some dissidents in Havana said that they had received some
assistance from one of these grantees. Additionally, the USAID Cuba
program director was able to confirm indirectly that some of this
grantee's shipments had reached Cuba.

For these three grantees, we identified numerous questionable transactions
and expenditures that USAID officials likely would have identified had
they performed adequate oversight reviews. For example, two grantees had
inadequate support for checks written to key officials of that
organization. In addition, one of these two grantees could not justify
some purchases made with USAID funds, including a gas chainsaw, computer
gaming equipment and software (including Nintendo Gameboys and Sony
Playstations), a mountain bike, leather coats, cashmere sweaters, crab
meat, and Godiva chocolates. According to this grantee's proposal, USAID
funds were to be used to provide humanitarian assistance and information
to dissidents and their families. Subsequent to our questions regarding
these purchases, the grantee's executive director wrote us that he
intended to submit corrections to USAID for some of these charges.

In conjunction with the USAID Assistant Administrator for Latin America
and the Caribbean and the Cuba program director, we referred the problems
we identified at the three grantees discussed in table 7 to the USAID
Office of Inspector General. An investigator said that the Office of
Inspector General was investigating these three grantees.

Based on our limited review, 7 of the 10 grantees appear to have
established systematic procedures for documenting, tracking, and reporting
on the use of grant funds. These 7 grantees accounted for about 91 percent
($47.2 million) of the awards received by the 10 organizations that we
reviewed (see footnote 44). The operating procedures at some of these 7
grantees are likely the result of pre-existing internal control operating
characteristics (and do not reflect USAID monitoring and oversight). These
grantees also had detailed records of their respective activities. For
example, one grantee maintained an inventory and signed receipts for
humanitarian shipments to Cuba, and dated, handwritten notes of telephone
calls or other communications to verify receipt of shipments. Another
grantee maintained detailed records of the methods used, quantities of
printed material transmitted, and copies of communications as evidence of
receipt.

Some Data Available about the Impact of U.S. Assistance

Agencies and grantees face an operating environment in Cuba that presents
monitoring and evaluation challenges. USAID has conducted some program
evaluation, but has not routinely collected program outcome information
from its grantees. Instead, USAID and its grantees have largely focused on
measuring and reporting program activities. In 2005-2006, however, USAID
began to focus on collecting better information about the results of U.S.
democracy assistance.

Operating Environment Presents Monitoring and Evaluation Challenges

The operating environment in Cuba poses a range of challenges to
monitoring and evaluating U.S.-funded democracy assistance. Challenges
include:

           o The lack of USAID presence in Cuba and the inability of the
           USAID staff to travel there, because the Cuban government actively
           opposes U.S. democracy assistance.
           o The lack of operational coordination and routine communication
           links between State and USAID (as previously discussed).
           o Grantee reluctance to share information with other grantees
           because of concerns about potential Cuban government infiltration
           of grantee operations.
           o USAID and grantee concerns that sensitive agency records could
           be disclosed in response to Freedom of Information Act requests
           (as previously discussed).
           o U.S. officials and grantees cited potential danger to dissidents
           and activists in Cuba if sensitive information was released or
           disclosed.

           The USAID Cuba program director said that in this environment,
           strict cause and effect relationships between the USAID program
           and changes in Cuban civil society are difficult to establish and
           document.48 Compared with activities in Cuba, off-island
           activities, such as those at U.S. universities, are generally
           easier to carry out, monitor, and evaluate, according to USAID
           officials. However, off-island activities have a less-evident and
           slower impact on Cuban society and politics.
			  
			  USAID and Grantees Have Conducted Some Evaluations of Cuba Assistance

           USAID's Cuba program office and its grantees have conducted some
           evaluations of U.S. assistance, but these studies have been
           limited in number and scope. USAID officials also have informally
           interviewed Cuban dissidents and emigres about the receipt and
           effectiveness of U.S. assistance, but they did not systematically
           document, compile, or analyze the results of these interviews.
           Although USINT has assessed some independent libraries in Cuba,
           USAID has not received its reports.
			  
			  USAID and Grantee Evaluations of Cuba Assistance

           USAID and its grantees have conducted some evaluations of U.S.
           democracy assistance for Cuba (see table 8). Generally, however,
           these efforts have not reflected a systematic approach to program
           evaluation, although some benefits resulted.

48Democracy assistance in authoritarian or totalitarian states such as
Cuba is often designed to lay the groundwork for future transitions and,
as such, the impact of that assistance can be difficult to measure,
particularly at an early stage. One democracy expert has written that
"many of the most important results of democracy programs are
psychological, moral, subjective, indirect and time-delayed." Thomas
Carothers, Aiding Democracy Abroad (Carnegie Endowment for International
Peace: Washington, D.C.: 1999, p. 340).

Table 8: Evaluations of USAID's Cuba Democracy Assistance, 1996-2005

                       Evaluation author, purpose, and  Our comments and      
Evaluation/study    findings                         observations          
Grantee evaluation  One year after increased         USAID and grantee     
of independent NGOs repression in Cuba, a grantee    officials stated that 
                       conducted an evaluation of some  they benefited from   
(2004-2005)         independent NGOs in Cuba at      this evaluation and   
                       USAID's request.                 that it provided      
                                                        otherwise unavailable 
                       The study methodology included   information.          
                       fieldwork in Cuba by subject                           
                       matter experts and telephone                           
                       interviews and analysis.                               
                                                                              
                       The study:                                             
                                                                              
                          o identified challenges--such                       
                          as an out-dated leadership                          
                          structure and "brain drain"                         
                          caused by emigration;                               
                          o identified best practices                         
                          and lessons learned; and                            
                          o included several                                  
                          recommendations to improve                          
                          program implementation.                             
External evaluation USAID contracted with            USAID implemented     
of USAID's Cuba     PricewaterhouseCoopers to assess some of the study's   
program             the effectiveness of its         recommendations but   
                       program, assess grantee          did not implement     
(2000)              compliance with the agreement    others, such as the   
                       terms and conditions, and        recommendation to     
                       recommend program improvements.  improve program       
                                                        performance (results) 
                       The study methodology included   measures.a            
                       reviewing grantee records and                          
                       interviews with grantee                                
                       representatives, U.S. officials,                       
                       academics, and other experts.                          
                       The study did not include                              
                       fieldwork in Cuba.                                     
                                                                              
                       The study found USAID's                                
                       administration of the Cuba                             
                       program to be generally                                
                       satisfactory. For monitoring and                       
                       evaluation, the study noted,                           
                       however, that baseline data and                        
                       targets to measure program                             
                       performance were drawn from                            
                       limited data sources and had                           
                       limited utility for monitoring                         
                       and evaluating the activities of                       
                       some grantees.                                         
                                                                              
                       The study recommended increasing                       
                       program staff, adopting a                              
                       research agenda to guide                               
                       planning and inform program                            
                       activities, expanding grantee                          
                       information sharing and                                
                       cooperation, and improving                             
                       measurement of program                                 
                       performance.                                           
Survey of recent    Survey of recent Cuban emigrants The Cuba program      
Cuban emigrants     to establish a baseline on       plans to fund a       
                       knowledge, attitudes, and access follow-up survey to   
(1999)              to accurate information about    measure changes in    
                       democracy, human rights, and     knowledge, attitudes, 
                       free enterprise.                 and access to         
                                                        information since the 
                                                        1999 survey.          
Focus groups with   Two grantees conducted focus     The USAID Cuba        
Cuban emigres       groups with recent Cuban emigres program director has  
                       to estimate the audience for,    participated in some  
(2003-2006)         and improve the content and      of these groups and   
                       effectiveness of, a              has reviewed some of  
                       pro-democracy newsletter         the resulting         
                       published and distributed in     analyses.             
                       Cuba by one of the grantees.                           
                                                                              
                       The grantees documented,                               
                       compiled, and analyzed the                             
                       results of these groups.                               
Grantee             USAID grants and cooperative     In our review of      
end-of-project      agreements require grantees to   USAID files           
reports             submit final reports containing  maintained for each   
                       an evaluation of the program's   grantee, we found few 
(various years)     accomplishments and failings,    end-of-project        
                       including comments and           reports.              
                       recommendations for potential                          
                       future work.                     Because agreements    
                                                        did not require       
                                                        intermediate program  
                                                        evaluations, USAID's  
                                                        frequent use of       
                                                        agreement extensions  
                                                        has allowed many      
                                                        projects to continue  
                                                        for several years     
                                                        without evaluation.b  

Source: GAO analysis of USAID and grantee records.

aIn technical comments on this report, USAID officials said that,
following the evaluation, the Cuba program relied on an annual census of
the Cuban opposition's on-island actions as a proxy indicator for
assessing the performance of USAID programs to help develop civil society
in Cuba (see our discussion of this measure below).

bIn technical comments on this report, USAID officials said that grantee
proposals requesting additional funding include lessons learned and other
information normally found in an end-of-project report. The interagency
committee reviewing the proposals uses this and other information to
evaluate grantee performance.

  USAID's Informal Interviews with Cuban Dissidents

The USAID program director also has conducted a number of informal
interviews with Cuban dissidents and members of independent Cuban NGOs
able to travel outside Cuba. Although limited by Cuban government controls
on travel, these opportunities provided USAID with some ability to verify
the receipt and impact of grantee assistance directly, according to USAID
officials. For example, the program director was able to verify that some
dissidents had received, and continued to use, computers shipped to the
island. In other cases, USAID has relied on USINT reporting to verify
receipt of such assistance. However, these interviews and discussions were
conducted on a sporadic basis, and USAID officials did not systematically
document, compile, or analyze the results.

  USINT Assessments of Independent NGOs in Cuba

USINT officials have done some monitoring of assistance (books, equipment,
and supplies) distributed to about 100 independent NGOs in Havana. (USINT
employees distributed this assistance, which it and USAID grantees had
purchased.) As we observed during our fieldwork, USINT employees kept
records of unannounced inspection visits to these organizations and
submitted summary reports to USINT officials. Based on these reports,
USINT officials have recommended increases or decreases in the level and
type of assistance provided to these NGOs. Although there have been
documented losses at some of these organizations, USINT officials said
such losses were unavoidable in Cuba and that their policy is to continue
providing some limited assistance to these NGOs. As discussed previously,
however, USAID has not received these reports.

USAID and Grantees Have Focused on Measuring and Reporting Program Activities

USAID and its grantees have not routinely collected and reported data and
other information about the results or impact of the democracy assistance
they have provided. USAID's reports have focused primarily on measures of
program activities. The Cuba program office's accomplishment reports,
updated on a monthly basis, consolidate quantitative data about activities
and related information submitted quarterly by grantees, such as the
number of books, newsletters, and other informational materials sent to
the island; the number of reports published by Cuban independent
journalists; and instances where the international community denounced
Cuban government human rights violations. The Cuba program's annual
operational plan takes a similar approach. USAID officials said that data
about shipments of books, newsletters, and other informational materials
provide a measure of the flow of information to Cuba. The officials also
said that data about the number of independent journalists published
outside Cuba on the Internet (or in hard copy) provide a measure of the
flow of information from Cuba. However, these reports and data do not
provide an assessment of the impact or contribution of these activities in
the context of helping to build civil society in Cuba (part of the USAID
Cuba program's strategic objective) or the effectiveness of U.S.
assistance in achieving broader U.S. democracy goals and objectives for
Cuba.49

In addition to measures of program activities, USAID officials point to
the total number of nonviolent acts of civil resistance in Cuba, as
reported in annual Steps to Freedom reports,50 as a proxy indicator for
measuring the positive impact of U.S. democracy assistance. Rich in detail
about Cuba's dissidents, the reports show that total nonviolent acts of
civil resistance increased from about 600 acts in 2001 to about 1,800 in
2004. However, the reports show that, between 2002 and 2004, the number of
less intense nonviolent acts of civil resistance increased while the
number of more intense acts declined.51 In commenting on a draft of our
report, State officials said that this decline coincided with the Cuban
government's 2003 crackdown on dissidents. Annual reports on human rights
conditions in Cuba prepared by Amnesty International, Human Rights Watch,
and State covering the same period (2001-2004) portray a more complex and
ambiguous human rights situation than the generally positive trend shown
by the indicator in the Steps to Freedom reports.

49One difficulty in assessing program impact is that USAID has not
identified intermediate outcomes for these objectives. Our prior work
suggests that identifying short- , intermediate-, and long-term outcomes
can help agencies evaluate program results, as required by OMB. For
example, see GAO, Program Evaluation: Strategies for Assessing How
Information Dissemination Contributes to Agency Goals, [52]GAO-02-923
(Washington, D.C.: Sept. 30, 2002).

50See, for example, Cuban Democratic Directorate and Center for the Study
of a National Option, Steps to Freedom 2004: A Comparative Analysis of
Civil Resistance in Cuba from February 2004 through January 2005 (Hialeah,
Florida: 2005).

Grantees' quarterly reports to USAID are the main vehicle for reporting
performance information. The quarterly reports submitted by 10 grantees in
2005 consistently provided data about program activities. However, these
reports generally did not provide a focused analysis of program
accomplishments. Only two organizations consistently identified program
results as part of their quarterly reporting. For example, one grantee's
reports discussed the results of assistance activities in the context of
the broader Cuban pro-democracy movement and short- and long-term civil
society goals. USAID officials said that they had repeatedly emphasized to
grantees the importance of including information about project results in
their reporting. The USAID Assistant Administrator for Latin America and
the Caribbean and the Cuba program director said that the director had
discussed this topic at grantee meetings held several times each year.

51The Steps to Freedom reports discuss three levels of nonviolent acts of
civil resistance that range from less to more intense: (1) protest and
persuasion, including organized or spontaneous public demonstrations of
discontent or against specific injustices; (2) intervention, including
creating alternative venues of expression and association, such as forming
independent libraries or labor unions; and (3) non-cooperation, which
implies a general withdrawal of public support for a government, including
refusal to participate in political activities. The 2004 report states
that the number of acts of intervention declined from 389 in 2002 to 100
in 2004. Comparing the number of acts of non-cooperation reported in the
2003 and 2004 reports shows a decline in this category from 37 acts in
2002 to 4 acts in 2004.

USAID Program Office Has Started to Focus on Collecting Better Information

Since 2005, USAID's Cuba program has taken several steps to improve data
collection and its communication with grantees. These include:

           o Increasing staff expertise and meeting more regularly with
           grantees. In 2005, a staff member with experience in grant
           management and performance evaluation joined USAID's Cuba office;
           this staff member developed, and began using, a set of structured
           questions to gather and record grantee performance information.
           This new staff member also began to meet and regularly communicate
           with grantees. However, the staff member said that the office's
           small number of staff makes effective program monitoring and
           evaluation challenging.52 
           o Improving information in grantees' quarterly reports. The Cuba
           program acknowledged that quarterly reports submitted by grantees
           have not included important information about program activities
           and results. Several grantees said that they were unsure of what
           evaluation-related information to include in reports and had
           received relatively little guidance from USAID until recently.
           According to USAID, smaller grantees have experienced greater
           challenges in this regard because of their lack of experience
           working with USAID and because of their limited English
           proficiency. USAID officials acknowledged grantees had not been
           provided formal training in program evaluation.

           In July 2006, USAID's Cuba program office e-mailed grantees a more
           detailed description of the types of data and other information to
           include in their quarterly reports, as part of a series of e-mails
           to remind grantees of USAID laws, regulations, and policies. USAID
           staff said that they are working with grantees to improve the
           quality of their quarterly reports and that they intend to issue
           additional written guidance.

           o Requiring intermediate program evaluations. In 2006, recognizing
           that the frequent use of agreement modifications and extensions
           had postponed end-of-project evaluations for many grantees, the
           Cuba program office decided to include terms in future grants and
           cooperative agreements requiring grantees to submit interim
           evaluations when requesting significant project modifications or
           extensions.
			  
			  Conclusions

           In the context of recent recommendations to increase funding for
           democracy assistance in Cuba, we conclude that the U.S.
           government's efforts to support democratic political change face
           several significant challenges. Some of these challenges stem from
           the difficult operating environment in Cuba, while others are the
           result of weaknesses in the managerial oversight the program has
           received to date. Recently, however, USAID has taken some steps to
           establish improved policies and reporting procedures.

           Effectively delivering democracy-related assistance to Cuba will
           require a number of improvements, including better communication
           between State and USAID regarding day-to-day activities,
           particularly in Cuba. In addition, a number of the basic elements
           required for effective grant management and oversight need to be
           strengthened. These include ensuring that effective preaward
           reviews are performed, strengthening internal controls at the
           grantee level, and identifying and monitoring at-risk grantees.
           Further, agency officials need to inform and, as needed, train
           grantees about their shared responsibilities in collecting
           information that will permit better monitoring and evaluation of
           program outcomes. Ultimately, better program oversight can help to
           assure that resources are responsibly and effectively utilized and
           grantees are in compliance with applicable laws and regulations.
			  
			  Recommendations for Executive Action

           We recommend that the Secretary of State and the USAID
           Administrator work jointly to improve communication among State
           bureaus in Washington, D.C.; USINT in Cuba; and USAID offices
           responsible for implementing U.S. democracy assistance,
           recognizing that USINT has limited resources but a crucial role in
           providing and monitoring democracy assistance.

           We also recommend that the USAID Administrator direct the
           appropriate bureaus and offices to improve management of grants
           related to Cuba by taking the following actions:

           o Improving the timeliness of preaward reviews to ensure they are
           completed prior to the awarding of funds.
           o Improving the timeliness and scope of follow-up procedures to
           assist in tracking and resolving issues identified during the
           preaward reviews.
           o Requiring that grantees establish and maintain adequate internal
           control frameworks, including developing approved implementation
           plans for the grants.
           o Providing grantees specific guidance on permitted types of
           humanitarian assistance and cost-sharing, and ensuring that USAID
           staff monitors grantee expenditures for these items.
           o Developing and implementing a formal and structured approach to
           conducting site visits and other grant monitoring activities, and
           utilizing these activities to provide grantees with guidance and
           monitoring.
			  
			  Agency Comments and Our Evaluation

           We received comments from State and USAID, which are reprinted in
           appendixes II and III, respectively. State and USAID appreciated
           the professionalism with which we conducted our review and were
           gratified that we were able to report that dissidents in Cuba
           appreciated U.S. democracy assistance, and found this assistance
           to be useful in their work. In response to our recommendation,
           State said that, consistent with the Secretary of State's recent
           foreign assistance reforms, it was taking steps to improve
           interagency communication and coordination for Cuba democracy
           assistance. These steps included providing USAID officials regular
           access to classified communications with USINT in Havana and
           State, and implementing regular meetings between DRL, the Bureau
           of Western Hemisphere Affairs' Office of Cuban Affairs, the Office
           of the Cuba Transition Coordinator, and USAID. State also
           commented that--within the constraints imposed by implementing a
           democracy-building program in Cuba--DRL and the Office of Cuban
           Affairs would work closely with all grantees to identify creative
           ways to document the impact of Cuba programs. These new methods of
           documentation would attempt to measure impact beyond direct
           outputs (e.g., items delivered or persons trained).

           USAID said it was taking actions to improve its performance in
           managing, monitoring, and evaluating democracy assistance for
           Cuba. These actions would include better documentation of USAID
           grantee monitoring, improved interagency communications, and a
           review of all aspects of the USAID procurement system as it
           relates to the Cuba program. Subsequent to submitting its written
           comments, USAID offered additional comments regarding our
           recommendations. USAID concurred with our first, second, third,
           and fifth recommendations, as well as with the part of our fourth
           recommendation that USAID should ensure that its staff monitors
           grantee expenditures. USAID concurred, in part, with our
           recommendation to provide grantees specific guidance on permitted
           types of humanitarian assistance and cost-sharing. To avoid
           potentially making grant documents unwieldy and difficult to use,
           USAID plans to continue to reference additional regulatory
           material regarding allowable costs and other matters in its
           grants. However, USAID will review its standard grant provisions
           to ensure that grantees are provided clear guidance regarding how
           to access referenced regulatory materials. USAID also is
           considering providing technical assistance for grants management
           and grant and regulatory documents to Cuba program grantees in
           Spanish.

           State and USAID provided technical comments on a draft of this
           report, which we have incorporated where appropriate. In its
           technical comments, USAID raised some issues regarding some of our
           findings. However, we have worked with agency officials to resolve
           or clarify these matters.

           We will send copies of this report to the Secretary of State, the
           USAID Administrator, appropriate congressional committees, and
           other interested parties. Copies will be made available to others
           upon request. In addition, this report will be made available at
           no charge on the GAO Web site at http://www.gao.gov .

           If you or your staff have any questions about this report, please
           contact David Gootnick at (202) 512-4128 or [email protected]
           . Contact points for our Offices of Congressional Relations and
           Public Affairs may be found on the last page of this report. GAO
           staff who made major contributions to this report are listed in
           appendix IV.

           David Gootnick, Director
			  International Affairs and Trade

           Jeanette M. Franzel, Director
			  Financial Management and Assurance
			  
			  Appendix I: Objectives, Scope, and Methodology

           This report examines (1) the roles and objectives of the agencies
           implementing U.S. democracy assistance targeted at Cuba and the
           characteristics and selection of the grantees1 receiving
           Department of State (State) and U.S. Agency for International
           Development (USAID) awards; (2) the types, amounts, beneficiaries,
           and methods used to deliver assistance for selected grantees in
           2005;2 (3) USAID's monitoring and oversight of these grantees; and
           (4) the availability of data to evaluate whether U.S. assistance
           has achieved its goals.

           During our review, we conducted fieldwork at USAID, State, and the
           Departments of Treasury (Treasury) and Commerce (Commerce) in
           Washington, D.C.; we also conducted work at the offices of
           selected grantees in Washington, D.C., and Miami, Florida. At
           these locations, we analyzed key records and interviewed agency
           officials and grantees to obtain an understanding of the processes
           used to select grantees, monitor their performance, assess the
           disbursement of funds, and evaluate project results. We also
           discussed Cuba democracy assistance with officials at the National
           Endowment for Democracy and the Council on Foreign Relations in
           Washington, D.C.

           We conducted fieldwork at the U.S. Interests Section (USINT) in
           Havana, Cuba, from late June-early July 2006, where we interviewed
           relevant U.S. government officials and observed their activities,
           such as sorting, delivering, and monitoring assistance. We
           interviewed several leading dissidents and human rights
           activists--including independent librarians and journalists--and
           family members of political prisoners. We also interviewed
           foreign-embassy officials.

           We conducted our work from August 2005 through September 2006 in
           accordance with generally accepted government auditing standards.

           To identify the roles and objectives of the implementing agencies,
           we analyzed (1) U.S. laws authorizing democracy assistance to Cuba
           and related records, such as agency officials' statements and
           committee reports; (2) State and USAID policy and strategy
           records, such as agency strategic and performance plans, budget
           requests, and bureau and mission performance plans; and (3) the
           two reports of the Commission for Assistance to a Free Cuba and
           related records. We also interviewed USAID, Treasury, Commerce,
           and State officials (including State's Cuba Transition
           Coordinator) about the objectives and roles of their agencies in
           providing assistance to Cuba.

           To examine the characteristics and selection of the grantees that
           received State or USAID awards in 1996-2005, we reviewed key
           grantee and agency records including annual reports, proposals,
           and Web sites for the 34 organizations that received State or
           USAID awards during that period; and the grants and cooperative
           agreements, agreement modifications, and related agency records
           for the 44 awards State and USAID made during that period. We
           analyzed this information to determine (1) the types and location
           of organizations that received awards; (2) whether these
           organizations had previously worked on democracy promotion
           activities; (3) the methods State and USAID used to identify and
           evaluate assistance proposals; and (4) selected characteristics of
           the awards, such as their initial amount and length, cost-sharing
           requirements, and any postaward modifications.

           To identify the types and amounts of assistance provided by
           grantees, beneficiaries of this assistance, and grantees' delivery
           methods, we selected a judgmental sample of 10 grantees with
           active awards in 2005 (see table 9). These 10 grantees were
           implementing 14 grants or cooperative agreements in 20053 with a
           total estimated budget of nearly $52 million. In selecting the
           grantees, we considered a range of factors to ensure our sample
           included a mix of large, medium, and small awards; included a mix
           of types of nongovernmental organizations (NGO); and covered the
           range of U.S. democracy assistance targeted at Cuba. We focused
           our detailed analysis on USAID's grantees and agreements because
           State's grants were not awarded until mid-2005. We also considered
           the length of time grantees had been providing U.S. democracy
           assistance for Cuba to ensure grantees had several years
           experience working with USAID.4 The resulting sample accounts for
           over 76 percent of the State and USAID awards active in 2005 for
           U.S. democracy assistance targeted at Cuba.

           Table 9: State and USAID Grantees and Awards that GAO Reviewed
			  
			  Appendix I: Objectives, Scope, and Methodology

1This report refers to nongovernmental organizations receiving either
grant or cooperative agreements as grantees.

2Unless otherwise noted, all annual references are to the U.S. fiscal year
(Oct. 1-Sept. 30).

3The 14 awards consist of 1 State grant of $2.3 million; and 1 USAID grant
and 12 USAID cooperative agreements totaling $49.6 million.

4At the time we conducted our site visits, the 10 grantees had received
USAID funding for Cuba democracy assistance for between 2.6 and 8.3 years,
with an average of 5.7 years.

                                 Grants and cooperative agreements
Grantee    Location        Number of awards Dollars (in millions)a 
Grantee 1  Washington, DC                 2                 $12.28 
Grantee 2  Miami, FL                      1                  10.95 
Grantee 3  Washington, DC                2b                  10.09 
Grantee 4  Miami, FL                      1                   4.94 
Grantee 5  Washington, DC                 2                   4.67 
Grantee 6  Miami, FL                      1                   3.05 
Grantee 7  Miami, FL                      1                   2.32 
Grantee 8  Miami, FL                      1                   2.02 
Grantee 9  Miami, FL                      2                   1.21 
Grantee 10 Miami, FL                      1                   0.36 
Total                                    14                 $51.89 

           Source: GAO analysis of State and USAID records. These grants and
           cooperative agreements were active in fiscal year 2005.

           aReflects agreement modifications as of 2005.

           bGrantee had one State and one USAID grant.

           To identify these organizations' program objectives, we analyzed
           grantee proposals, grants or cooperative agreements, internal
           authorization memorandums, and modification of assistance forms.
           We obtained grantees' quarterly narrative and financial reports to
           USAID to identify grantees' reported activities and to quantify
           the types and amounts of assistance these grantees reported
           sending to Cuba. To corroborate these data and to develop an
           understanding of grantees' delivery methods, we interviewed
           representatives of these organizations in Washington, D.C., and
           Miami and, when possible, observed their activities. We also
           reviewed internal documents provided by these grantees, including
           procedures manuals, tracking databases and reports, and other
           records.

           We developed an electronic database to track and analyze selected
           terms of the agreements in our sample, including objectives, award
           amounts and dates, cost-sharing amounts, modifications, sub-grant
           agreements, and reported activities. To test the general
           reliability of quantities of assistance recorded for our sample,
           we compared these data with other documents provided by grantees
           (e.g., shipment logs, tracking databases, and internal reports),
           documents submitted by USAID, and data provided by USINT. We also
           used interviews with grantee representatives to corroborate these
           data. Based on these general comparisons, we determined grantees'
           records were sufficiently reliable for the purposes of this
           report.

           To identify the types and amounts of assistance provided by
           grantees in our sample, we used our electronic database to track
           and summarize grantees' individual activities, which we then used
           to categorize assistance types and amounts. In addition, we
           interviewed representatives of the grantees in our sample and
           select beneficiaries in Havana about their experiences.

           To assess USAID's management and internal control for monitoring
           grantees, we reviewed grants and cooperative agreements,
           interviewed agency officials and select grantees, reviewed USAID
           and grantee policies and procedure manuals, performed
           walk-throughs of grantee disbursement processes, and reviewed
           grantee invoices and supporting documentation. For 10 grantees, we
           reviewed the internal controls and related residual fiscal
           accountability risk. Based on our initial reviews, we performed
           additional expenditure testing for 3 grantees that appeared to
           have poor control environments. To assess grantees' potential
           fiscal accountability residual risk, we reviewed the adequacy of
           their internal controls according to the criteria contained in our
           Standards for Internal Control in the Federal Government.5 Our
           procedures did not specifically address whether grantees were
           complying with federal laws and regulations. However, grantees
           expending more than $500,000 in federal funds annually are subject
           to the Single Audit Act. Under this act, these grantees must
           receive an annual audit, which includes determining whether the
           grantee has complied with laws, regulations, and the provisions of
           contracts or grant agreements that may have a direct and material
           effect on each of its major programs. We focused our detailed
           analysis on USAID's grant oversight and did not perform similar
           detailed analysis of State's grant oversight because State's
           grants were not awarded until mid-2005.

           We performed a detailed review of 5 of 14 grant agreements in our
           sample. We selected these agreements because they represented the
           range of Cuba program objectives outlined and were signed over an
           8-year period between 1997 and 2005. A USAID official confirmed
           that all grant and cooperative agreements use standard language
           from document-generating software. The standard language is
           modified periodically under the direction of the USAID's Office of
           Acquisition and Assistance.

           To assess the monitoring and reporting of program performance
           information evaluation, we examined USAID, Office of Management
           and Budget, and other federal government policies and guidance. We
           also reviewed our previous reports and expert panel reports on
           grant accountability to identify lessons learned. To better
           understand the challenges of evaluating democracy assistance, we
           reviewed relevant literature. We also analyzed USAID Cuba program
           documents, grantee agreements, and modifications to identify
           guidance provided on reporting performance data. We also analyzed
           grantee quarterly reports to identify how they reported program
           achievements. We also assessed evaluations of U.S. assistance to
           Cuba, such as one grantee's evaluation of some independent NGOs,
           the PricewaterhouseCoopers evaluation of the USAID Cuba program,
           and associated program documents.

           We interviewed USAID Cuba program officials concerning their
           current and past program evaluation practices; program grantees in
           Miami and Washington, D.C., to identify the instructions and
           feedback they have received concerning program reporting and
           evaluation; USINT officials concerning their role in monitoring
           and reporting program performance information; and beneficiaries
           in Cuba about their views of the effectiveness of the U.S.
           democracy assistance they had received. We focused our detailed
           analysis on USAID's program effectiveness because State's grants
           were not awarded until mid-2005.

           Both State and USAID officials provided sensitivity reviews of a
           draft of this report, and we followed their direction in removing
           potentially sensitive or classified information.
			  
			  5GAO/AIMD-0021.3.1 (Washington, D.C.: Nov. 1999).
			  
			  Appendix II: Comments from the Department of State
			  
			  Appendix III: Comments from the U.S. Agency for International Development
			  
			  Appendix IV: GAO Contacts and Staff Acknowledgments
			  
			  GAO Contacts

           David Gootnick, (202) 512-3149 or [email protected] Jeanette
           M. Franzel, (202) 512-9471 or [email protected]
			  
			  Staff Acknowledgments

           In addition to the contacts named above, Phillip Herr, Michael
           Rohrback, Bonnie Derby, Elizabeth Guran, Keith H. Kronin, Todd M.
           Anderson, Cara Bauer, Lynn Cothern, and Reid Lowe made key
           contributions to this report. Ernie Jackson, Lauren S. Fassler,
           and Arthur L. James, Jr., provided technical assistance.
			  
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52The 2000 PricewaterhouseCoopers evaluation report concluded that the
unusual nature of the Cuba program created a heavy workload for USAID's
Cuba program office and that the office was understaffed.

(320373)

www.gao.gov/cgi-bin/getrpt?GAO-07-147.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact David Gootnick at (202)
512-3149 or [email protected].

Highlights of GAO-07-147, a report to congressional requesters

November 2006

FOREIGN ASSISTANCE

U.S. Democracy Assistance for Cuba Needs Better Management and Oversight

U.S. law authorizes aid for nonviolent democratic change in Cuba. From
1996-2005, State and USAID awarded grants totaling $74 million to support
such change. A presidential commission recently recommended increasing
funding for these efforts.

This report examines (1) agency roles in implementing this aid and
selection of grantees; (2) types of aid, recipients, and methods of
delivery reported in 2005; (3) oversight of grantees; and (4) data about
the impact of this aid.

To address these objectives, we analyzed the activities and internal
controls, and USAID's oversight and management of, 10 grantees with about
76 percent (in dollars) of total active awards for Cuba democracy aid. Our
review focused on USAID because State's first awards were not made until
mid-2005.

[64]What GAO Recommends

GAO recommends that State and USAID work jointly to improve interagency
communication about Cuba assistance, and that USAID improve its management
and oversight of grantees.

State and USAID officials said that they were taking steps to improve
interagency communications. USAID said it was taking steps to improve the
agency's management, monitoring, and evaluation of democracy assistance to
Cuba.

The Department of State (State) and the U.S. Agency for International
Development (USAID) implement U.S. democracy assistance for Cuba through
an interagency process. However, communication between these agencies was
sometimes ineffective, most critically about grantees' on-island
activities. About 95 percent ($62 million) of USAID's total awards were
made in response to unsolicited proposals; however, after 2004, both USAID
and State used formal competition to select grantees.

Dissidents in Havana said that U.S. assistance provided moral support and
enhanced their ability to work for democracy. In 2005, the 10 grantees we
reviewed delivered humanitarian and other aid, training, and information
to human rights and political activists, independent librarians and
journalists, and political prisoners and their families. Assistance
shipped to Cuba included food, medicine, clothing, office equipment and
supplies, shortwave radios, books, and newsletters. Grantees also
conducted international advocacy for human and workers' rights in Cuba and
planned for a future democratic transition. Given the Cuban government's
repressive policies and opposition to U.S. democracy assistance, grantees
employed a range of discreet delivery methods that varied in terms of
security, flexibility, and cost. The U.S. Interests Section in Havana,
Cuba, a State post, has played an important role in distributing the aid
provided by some grantees.

Internal controls--both over the awarding of Cuba program grants and
oversight of grantees--do not provide adequate assurance that the grant
funds are being used properly and that grantees are in compliance with
applicable laws and regulations. Preaward reviews of grantees were not
always completed before awards, and USAID did not follow up adequately
after awards to correct weaknesses in grantee policies, procedures, and
accounting systems identified by these reviews. In addition, standardized
grant agreements did not provide sufficient details to support program
accountability or the correction of the weaknesses identified by preaward
reviews. The Cuba program office also did not adequately manage at-risk
grantees and lacked formal review or oversight procedures for monitoring
grantee activities. We performed limited testing for 10 grantees and
identified questionable expenditures and significant internal control
weaknesses with 3 grantees that USAID had not detected.

The Cuban government's active opposition to U.S. democracy assistance
presents a challenging operating environment for State and USAID. Although
USAID and its grantees have some evaluation and anecdotal information
about program results, they have focused on measuring and reporting
program activities, such as the volume of food, medicine, or books sent to
Cuba. USAID recently took several steps to collect better information
about program results, such as increasing staff expertise and meeting more
regularly with grantees.

References

Visible links

  46. http://www.gao.gov/cgi-bin/getrpt?GAO-02-471
  47. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21
  48. http://www.gao.gov/cgi-bin/getrpt?GAO-02-471
  49. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21
  50. http://www.ignet.gov/randp/rpts1.html
  51. http://www.gao.gov/cgi-bin/getrpt?GAO-06-382SP
  52. http://www.gao.gov/cgi-bin/getrpt?GAO-02-923
  
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