Northern Central America Humanitarian Response: USAID Took Steps to Mitigate Fraud Risks, but Opportunities Exist to Clarify Guidance on Assessing Sanctioned Group Risk

Audit Report
Report Number
9-000-23-001-P

Why We Did This Audit

  • In April 2021, the U.S. government announced that USAID would provide $125 million in humanitarian assistance to the northern Central American countries of El Salvador, Guatemala, and Honduras. This aid was intended to address the immediate needs of those impacted by recurrent drought, food insecurity, and the COVID-19 pandemic.

  • We know from our oversight of prior emergency responses that humanitarian assistance can be compromised by fraud and diversion, due in part to the presence of criminal organizations and/or U.S.-sanctioned organizations.

  • We conducted this audit to assess the extent to which USAID’s Bureau for Humanitarian Assistance (BHA) ensured that (1) the organizational risks of fraud, waste, and abuse stemming from the presence of sanctioned groups or individuals in the northern Central America response were assessed and (2) cash-transfer activities were designed to mitigate selected risks of fraud and diversion.

What We Found

  • BHA did not consistently follow guidance to assess the risks posed by sanctioned groups prior to implementing programming.

  • BHA took steps designed to mitigate selected fraud and diversion risks in its programming, but there were opportunities to further strengthen the documentation of risk assessments and data sharing.

Why It Matters

  • We have previously noted that managing fraud and diversion risks to humanitarian assistance remains one of USAID’s top management challenges.

  • To mitigate risks of fraud and diversion posed by sanctioned groups and ensure that humanitarian assistance reaches those who need it most, often under tight timelines and with significant scrutiny, it is critically important for USAID to communicate clear expectations in its guidance on assessing sanctioned group risk for both BHA staff and award applicants.

  • We made five recommendations to improve USAID/BHA’s processes for assessing and mitigating fraud and diversion risks. BHA agreed with all five recommendations, including the need to update internal guidance to clarify language describing the measures of risk posed by sanctioned groups that are sufficient to prompt BHA staff to complete additional due diligence.

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Recommendations

Recommendation
1

Bureau for Humanitarian Assistance: Update internal guidance to clarify (1) the language describing the measures of risk posed by sanctioned groups that are sufficient to prompt Bureau for Humanitarian Assistance staff to complete additional due diligence, and (2) how changes to the response context should influence the award approval process regarding the Bureau for Humanitarian Assistance's assessment of risk posed by sanctioned groups.

Questioned Cost
0
Funds for Better Use
0
Close Date
Recommendation
2

Bureau for Humanitarian Assistance: Update the Emergency Application Guidelines to clarify applicant instructions for responding to additional requirements for high-risk environments in cases where a country is not on the Bureau for Humanitarian Assistance's non-exclusive list but where sanctioned groups are present.

Questioned Cost
0
Funds for Better Use
0
Close Date
Recommendation
3

Bureau for Humanitarian Assistance: Review the sanctioned group risk analyses for El Salvador, Guatemala, and Honduras to respond to the guiding questions that were not fully answered in one country analysis and to specifically consider risks identified by the Bureau for Humanitarian Assistance and implementers in other analyses, as appropriate, and update those analyses as necessary.

Questioned Cost
0
Funds for Better Use
0
Close Date
Recommendation
4

Bureau for Humanitarian Assistance: Establish a requirement for documenting the Bureau for Humanitarian Assistance staff's review of all applicants' Risk Assessment and Management Plans.

Questioned Cost
0
Funds for Better Use
0
Close Date
Recommendation
5

Bureau for Humanitarian Assistance: Conduct an analysis to determine what, if any, options exist to further reduce the risk of beneficiary duplication among Bureau for Humanitarian Assistance-funded implementers of cash transfer activities in El Salvador, Guatemala, and Honduras, until such time as country cash-working groups have sufficient capacity to support these efforts.

Questioned Cost
0
Funds for Better Use
0
Close Date