The government agency in charge of administering civilian foreign aid and development assistance, the U.S. Agency for International Development (USAID), is not properly assessing or documenting the fraud risk in allocating the money in countries such as Ukraine, a new Government Accountability Office (GAO) report noted.
The report, released on April 30, said that after reviewing USAID’s policy and procedures, the agency—which allocated $26 billion to at least 19 countries experiencing conflict last year—isn’t following its own practices.
The “GAO found that, contrary to leading practices, USAID did not comprehensively assess or document, in fraud risk profiles, the relevant fraud risks affecting its assistance in the three conflict-affected countries GAO selected for its review—Nigeria, Somalia, and Ukraine,” the report noted. “As a result, USAID cannot ensure it has identified and is mitigating all relevant fraud risks in these countries.”
Findings
The report critically evaluated the risk-management processes on how USAID manages the delivery of aid in such conflict-affected areas, with a particular emphasis on Nigeria, Somalia, and Ukraine.The GAO found that USAID has standard processes to assess various risks (e.g., fiduciary, counterterrorism, security) associated with delivering assistance in conflict zones. However, the GAO found that USAID does not perform a comprehensive assessment of all relevant fraud risks, particularly failing to document these risks in fraud-risk profiles.
“However, the GAO found that, contrary to leading practices, USAID did not comprehensively assess or document, in fraud risk profiles, the relevant fraud risks affecting its assistance in the three conflict-affected countries,” the report found. “As a result, USAID cannot ensure it has identified and is mitigating all relevant fraud risks in these countries.”
Due to the challenges of conducting direct oversight in conflict zones, USAID often relies on remote techniques, such as third-party monitoring. However, the report found there is inconsistent application and understanding of these techniques across missions due to the absence of clear guidance on how to effectively use third-party monitoring to detect risks.
While the missions in Nigeria and Ukraine conduct financial reviews to detect fiduciary risks, the Somalia mission does not, indicating inconsistency in financial oversight practices across different missions.
Although USAID’s Bureau for Humanitarian Assistance and for Conflict Prevention and Stabilization use formal mechanisms to share lessons learned about risk management, there is no overarching system for missions in conflict-affected countries to share such knowledge.
This lack of systematic sharing prevents missions from learning from each other’s experiences and best practices, potentially leading to repeated mistakes, the GAO found.
The GAO made nine specific recommendations to USAID to enhance its risk-management capabilities in conflict zones.
Agency Response
The official agency response letter, authored by Colleen R. Allen, assistant administrator of the Bureau for Management at USAID, expressed appreciation for the independent review conducted by the GAO and concurred with its recommendations aimed at enhancing risk management in conflict zones.USAID agreed with the GAO’s suggestions to have its bureaus and missions perform comprehensive fraud-risk assessments, update guidance for monitoring, and systematically share lessons learned across conflict zones.
USAID stated they will have their Bureaus for Humanitarian Assistance (BHA), Conflict Prevention and Stabilization (CPS), and specific missions in Ukraine, Nigeria, and Somalia develop fraud risk profiles, adhering to the USAID Anti-Fraud Plan and federal guidelines.
The agency also plans to update their guidance documents concerning fiduciary, counterterrorism, sanctions-related, and security risks, including an evaluation of remote monitoring tools.
USAID Questioned
In a budgetary hearing for USAID in front of the House Foreign Affairs Committee last month, Chairman Rep. Michael McCaul (R-TX) noted the agency was important in promoting American “soft power” overseas while also delivering life-saving humanitarian programs.In his questioning of USAID Administrator Samantha Power, Mr. McCaul asked about a range of topics including combatting the Chinese Communist Party’s (CCP) “debt trap diplomacy” and “allegations of U.S. assistance being diverted to the Taliban.”
He alluded to the agency having a focus more on wish list goals of diversity, equity, and inclusion (DEI) than combatting malign influences.
“The budget you have submitted to our committee has some good provisions to project American leadership,” Mr. McCaul said. “However, much of this budget reads more like a wish list than a strategic document to promote American leadership … The president’s budget seems to place a higher priority on DEI programs than combatting CCP malign influence. His budget includes $3 billion earmarked for, ‘inclusive gender equity’ and another $200 million for a ‘gender equity and equality action fund.’ Imposing these political ideologies is not aid in my judgment.”
Rep. Tom Kean, Jr. (R-NJ), a member of the House Foreign Affairs Committee who led a delegation of his colleagues to Ukraine following the most recent Ukraine aid passage, asked Ms. Powers about what oversight procedures are in place to ensure some of the $22.9 billion in direct budget help to Ukraine for its citizens is not subject to waste, fraud and abuse.
“We started very early on when this direct budget support began to flow, which is provided only for verified expenditures … So, those expenditures have to be verified before the money flows,” Ms. Power said. “It’s not like you hand over a check for a billion dollars every month—and it goes from there.”
She said the funds go toward first responders, teachers, and health-service workers for instance. She said the agency had additionally brought in accounting firm Deloitte to do “spot checks” across the various Ukrainian ministries receiving the funds as well as KPMG auditing all of the Ukrainian direct budget support.
She added that the USAID Office of the Inspector General has “significantly ramped up” staff working on oversight, specifically regarding direct budget support, including on the ground in Kyiv, Ukraine.
Mr. Kean further asked about whether the agency had begun to implement a USAID Office of Inspector General (OIG) action plan to verify the accuracy of salary expenditure reports and remediate any identified deficiencies in relation to direct budgetary aid for healthcare workers.
The report Mr. Kean is referring to was issued in February 2024 by the USAID OIG and focused on the $1.7 billion in “direct budget support (DBS), directed through the World Bank’s Single Donor Trust Fund (SDTF), to reimburse the Ukrainian government for the salaries of healthcare workers from January to July 2022.”
That report found that while USAID ensured that the Ukrainian government adhered to the required controls such as submitting monthly salary reports and bank statements, it did not verify the accuracy of these reported expenditures.
Discrepancies identified by Deloitte in the salary data could not be easily traced back to source documents, indicating issues with data quality and validation.
Ms. Power said that the agency had already taken remedial steps when that report was issued and the issues found in the report were the result of “gaps in how [USAID] was doing verification on salaries specifically” and the issues had been “smothered and addressed.”
