Lawmakers demand information about USAID indirect cost rates

Two Republican lawmakers want the U.S. Agency for International Development to turn over nonpublic information about the overhead rates it negotiates with NGOs, United Nations agencies, and contractors that deliver humanitarian assistance on its behalf. These Negotiated Indirect Cost Rate Agreements — or NICRAs — allow organizations to use a portion of the funding they receive from the U.S. government to pay for things like employee benefits, rent and facilities expenses, and administrative and support personnel costs. USAID and its partners do not typically make these rates public since doing so could affect business competitiveness. The heightened scrutiny comes on the heels of unprecedented bipartisan budget allocations for USAID in response to the war in Ukraine and the lingering fallout from the COVID-19 pandemic. Lawmakers approved supplemental funding that pushed USAID’s spending to more than $30 billion last year — and some of them are following that up with a closer look at the agency’s books. Sen. Joni Ernst, a Republican from Iowa, and Rep. Michael McCaul, a Republican from Texas, sent a “formal oversight request” to USAID Administrator Samantha Power on Monday. “We understand that some indirect costs are a necessary expense when delivering humanitarian assistance; however, we have serious concerns over the lack of oversight regarding the issuing and review of your agency’s NICRAs with USAID’s partners,” Ernst and McCaul wrote. “We fear NICRAs have ballooned due to lack of stewardship and care,” they wrote. In the letter, the lawmakers did not provide specific information to substantiate that concern. Ernst and McCaul demanded that USAID turn over to the House Foreign Affairs Committee documents showing NICRAs that have been negotiated and agreed since the start of the Biden administration. They also demanded access to a database tracking those rates and documents describing USAID’s policies and staffing for negotiating them. McCaul chairs the House Foreign Affairs Committee, which has oversight responsibility for USAID. In a statement, a USAID spokesperson wrote to Devex that the agency “ensures it is negotiating a fair NICRA rate through annual audits of indirect rates. The audit objective is to determine whether the claimed indirect costs are accurate, allocable, and reasonable.” “USAID complies with all Federal regulations governing indirect costs and follows the same procedures as all other U.S. government agencies,” they added. When an organization that receives government funding gets an approved NICRA rate with one federal agency, the same rate then also applies to funding from other parts of the government. The letter focuses on indirect costs associated with delivering humanitarian assistance, which is the funding category that saw major increases last year. Senator Ernst has been critical of the agency’s approach to spending that money. In a pair of letters last year, she charged that USAID has been too slow in obligating its funding and over-reliant on United Nations agencies to deliver it. The latest letter calls on USAID to make “every effort to ensure the maximum amount of funds provided to international NGOs, United Nations agencies, and contractors are being used to actually deliver urgently needed assistance to impoverished and developing communities.” In addition to their concerns about overhead rates, Ernst and McCaul described ongoing frustration with USAID’s unwillingness to provide the information they have requested in order to carry out their oversight responsibilities. They charged that the agency has provided a “shifting rationale” for refusing to provide their offices with NICRAs and information about how they are agreed. First, according to excerpts of correspondence included in the letter, USAID wrote that it does not have a system to track or report on this data, then wrote that providing it would be illegal, then wrote that the agency would not provide confidential business information “outside the scope of a formal oversight request by a committee of jurisdiction.” “Now that USAID is in receipt of this formal oversight request by its principal oversight committee in the U.S. House of Representatives, it must provide requested information on NICRAs without further delay,” the letter reads. The USAID spokesperson wrote to Devex that, “USAID diligently works to meet its legal obligation to protect the confidential business information of its implementing partners, including NICRAs, while also cooperating fully with Congressional oversight.”