USAID should 'rethink its culture of partnership with implementers,' inspector general says

WASHINGTON — U.S. Agency for International Development Inspector General Ann Calvaresi Barr on Thursday called for a rethink in the way the agency works with implementers and outlined several key management challenges that are preventing the most efficient and effective use of its funds.

Barr spoke at a House Appropriations State and Foreign Operations subcommittee hearing focused on mismanagement at USAID and the State Department, which gave members of Congress an opportunity to get an update from the offices charged with oversight of U.S. foreign aid.

Rep. Hal Rogers, the top Republican on the subcommittee, praised the work of the inspectors general but said he was disappointed some of the “chronic mismanagement challenges” are not addressed sufficiently by the agencies.

“We need to shine a light on these problems and ensure that top leadership of the agencies are acting on your recommendations,” he said.

Committee Chair Rep. Nita Lowey, a Democrat from New York, pointed out that the appropriations committee had ensured that the House budget bill includes full funding for the inspectors general offices — above the amount the administration had requested, which the USAID inspector general had said would be insufficient to carry out the job.

At the hearing, Barr gave a readout of the key management challenges for USAID that the IG had identified for fiscal year 2019: managing risk in humanitarian and stabilization assistance, analysis and planning around country capacity to ensure sustainability, reconciling interagency priorities and the integrity of its financial and information systems, Barr said.

USAID has responded to some of the IG recommendations and in some cases made foundational changes, including strict requirements for implementer awards, stronger standards for overseeing U.N. agencies, shoring up a commodities supply chain, promptly responding to identify diversions of funding to terrorist organizations, and focusing on requirements for reporting sexual exploitation or abuse of beneficiaries, she said.

Despite that “the agency needs to rethink its culture of partnership with implementers. No doubt they are critical to USAID’s mission but it must first ensure implementers fully understand the requirements that they are entrusted with and expected to carry out. Ultimately USAID must be the first line of defense but they must also hold others they rely on accountable,” Barr said.

In response to a question from Rep. David Price, a Democrat from North Carolina, Barr said that the USAID IG is looking at the impacts of funding drawdowns in the West Bank and Gaza, the Northern Triangle, and in South Sudan.

The funding cuts have impacted the implementer community and the uncertainty “creates chaotic operations,” so the office is looking at how a lack of funding consistency might impact program sustainability and whether USAID will lose ground on past good work as a result, she said.

Rep. Grace Meng, a Democrat from New York, asked about the $9.5 billion global health supply chain contract Chemonics holds, which first came under scrutiny in 2017 and has been plagued with problems. This issue is the subject of ongoing investigations and oversight by the inspector general. Meng asked what safeguards were in place to ensure that doesn’t happen again, asking whether aggressive oversight of a contract of that size was even possible.

In June 2017, the IG’s office released a memorandum outlining “potential areas of concern” about the contract’s financial protocols that “may expose the program to possible fraud and abuse.”

At the hearing, Barr said the IG’s office has uncovered a number of risks associated with the logistics of delivering lifesaving health products, storage facilities, and record-keeping. Its audits into the contract and into challenges in Africa’s global health supply chain are ongoing. Thus far the investigations have led to 41 arrests and 30 indictments and led the global health bureau to have a third party monitor overseeing health supply commodities in eight African countries.

Those investigations point to what has gone wrong but now the IG’s office is looking at why it happened, the root causes and will be looking at the contract and how it was awarded, Barr said. It will also continue to audit the contract to evaluate how some of the problems have been addressed both in what USAID is doing differently, what is being done to address local capacity, implementer responsibility, and the effectiveness of USAID oversight, she added.

“I don’t want to paint the picture that all these problems that we found necessarily lie with Chemonics but when you’re transferring funds and supplies that are very very [needed] and very valuable, particularly in third world countries, you need to make sure that the host government has the capacity to receive them, to do their own inventory controls, has strong internal controls,” Barr said.

Barr also brought up a report released Thursday about the Overseas Private Investment Corporation that looks at the agency’s compliance with appropriations requirements and offers several recommendations. Some of the problems found were related to internal controls at the agency and Barr said they “need to be fixed” before the transition occurs to the new U.S. Development Finance Corporation later this year so the new agency isn’t operating with a “fundamentally flawed” system of internal controls.

Update, July 12, 2019: The article has been updated to clarify that it was the USAID inspector general that said the administration’s budget request was insufficient.

Update, July 15, 2019: The article has been updated to clarify language about the contract and broader challenges identified by the inspector general.