Public International Organizations: USAID Did Not Consistently Perform Expected Due Diligence

Evaluation
Report Number
E-000-24-002-M

Why We Did This Evaluation 

USAID regularly partners with multilateral organizations, including United Nations agencies such as the World Food Programme and UNICEF, and the World Bank. These organizations, also known as public international organizations (PIOs), deliver development and humanitarian assistance in complex, emergency situations. In the past year, USAID has relied heavily on PIOs to implement its humanitarian assistance programming for its pressing responses in Gaza and Ukraine. 

While USAID’s obligations, disbursements, and in-kind contributions to PIOs increased 282 percent from $5.6 billion in fiscal year (FY) 2019 to $21.4 billion in FY 2022, PIOs are not subject to the same rigorous oversight regulations as contractors, grantees, and other nongovernmental organizations. This limits USAID’s insight into how PIOs manage U.S.-provided foreign assistance funds. Nevertheless, USAID’s policies on managing PIO agreements include a variety of due diligence mechanisms to help ensure proper oversight of U.S. funds. 

Our evaluation objective was to determine the extent USAID performed expected due diligence over funding to selected PIOs. We focused on the 67 PIOs that received $45.9 billion total in USAID funding between FYs 2019 and 2022. 

What We Recommend 

We made three recommendations to USAID’s Bureau for Planning, Learning, and Resource Management/Office of Development Cooperation to strengthen USAID’s oversight of PIOs. The Agency agreed with two recommendations and partially agreed with one recommendation.

What We Found 

USAID did not consistently use pre-and post-award due diligence mechanisms to ensure effective oversight of PIOs. Before making an award, USAID must perform an organizational capacity review (OCR) of the PIO to ensure it is capable of adequately safeguarding Agency resources. OCRs should be updated at least every 5 years. However, USAID did not conduct OCRs in line with Agency guidelines for more than 70 percent of PIOs. Rather than using OCRs to understand that challenges that PIOs faced when administering USAID funds, Agency staff relied more on Multilateral Organisation Performance Assessment Network assessments or other types of risk assessments and management plans. 

Additionally, when an OCR included recommendations for corrective action, USAID did not have a formal follow-up mechanism to ensure that the Agency addressed the recommendations. 

After making an award to a PIO, USAID can apply due diligence oversight mechanisms that vary by agreement type. A USAID official said most PIO agreements are made through cost-type awards, and the Agency’s policy for these awards allows for spot checks related to USAID-funded activities. However, for the cost-type awards we reviewed, USAID officials generally did not perform spot checks. Moreover, USAID had limited guidance for conducting spot checks and did not track their occurrence or results. 

USAID has limited insight into how PIOs manage billions of dollars in U.S. funding, so the use of pre-and post- award due diligence mechanisms can help USAID officials ensure that a PIO is capable of safeguarding Federal funding. When USAID does not use these mechanisms, Agency officials lack access to information on potential vulnerabilities in a PIO’s policy and organizational framework and project operations and management that might lead to waste or misuse of critical U.S. aid funds.

Recommendations

Recommendation
3

Develop and communicate guidance on post-award spot checks to include a more detailed definition of spot checks, illustrative procedures and opportunities for their use, and procedures for appropriately communicating their results, when warranted.

Questioned Cost
0
Funds for Better Use
0
Recommendation
1

Develop and implement a process to track the status of organizational capacity reviews and ensure they are updated in accordance with Automated Directives System Chapter 308.

Questioned Cost
0
Funds for Better Use
0
Recommendation
2

Develop and implement a formal follow-up mechanism to track the resolution of recommendations included in organizational capacity reviews.

Questioned Cost
0
Funds for Better Use
0