The Inspectors General for the Department of Defense, Department of State, and the U.S. Agency for International Development conduct oversight of and report on the overseas contingency operation "Operation Atlantic Resolve (OAR)," including U.S. Government activities related to Ukraine, pursuant to Section 1250B of the National Defense Authorization Act for Fiscal Year 2024 and Lead IG reporting responsibilities under 5 U.S.C. 419. This report also discusses the planned, ongoing, and completed oversight work conducted by the Department of Defense (DoD), the Department of State (State), and the United States Agency for International Development (USAID) Offices of Inspector General, as well as the other U.S. oversight agencies that coordinate their activities through the Ukraine Oversight Interagency Working Group. OAR is the U.S. contingency operation to deter Russian aggression against NATO and to reassure and bolster the alliance in the wake of Russia’s 2022 full-scale invasion of Ukraine. OAR also includes security assistance activities in support of Ukraine.
On July 1, State assumed responsibility for administering most foreign assistance, including programs currently financed by and functions previously managed by USAID. The transition was accompanied by staffing constraints and limited time for planning, which hindered the effective transfer of institutional knowledge, restricted access to key information systems, and complicated risk management related to personnel, contractual matters, and partner oversight. The sudden termination of awards (followed in some cases by a reversal of the termination) disrupted implementers’ internal controls, making it difficult to carry out proper closeout procedures.
Prior to the January 25 Executive Order on Reevaluating and Realigning United States Foreign Aid, USAID Ukraine managed the $30.2 billion in DBS, funded through U.S. bilateral assistance, for disbursement to the Ukrainian government through the World Bank—USAID’s largest Ukrainian government support program.127 In addition, USAID provided the $535 million loan guarantee that secured a $20 billion U.S. loan for Ukraine, provided through a World Bank Financial Intermediary Fund as part of the $50 billion G7 Extraordinary Revenue Acceleration plan paid for by the windfall proceeds earned from Russia’s immobilized assets. Of the $20 billion, $16 billion was allocated for DBS.
USAID reported that as of the end of the quarter, 25 programs in Ukraine had been terminated, 29 remained active, 5 were under stop-work orders, and 4 were status unknown. USAID Ukraine reported that it transferred management of the 29 USAID-funded active programs, the 5 under stop-work orders, and oversight of the $50 billion in Direct Budget Support (managed by the World Bank) to State effective July 1.
The termination of third-party monitoring contracts has further limited USAID’s ability to oversee programs. Reports from third-party monitors support real-time programmatic adjustments and inform both current and future decision-making. These reports highlight key activity success, challenges, and feedback from beneficiaries and local stakeholders. USAID said that, without independent monitoring, it cannot verify that programs are being implemented in line with award terms, increasing the risk of waste, fraud, and abuse— especially in conflict-affected areas, where there is a heightened potential for diversion of funds.
During the quarter, USAID BHA’s non-governmental organization and international partners continued to provide critical humanitarian support to beneficiaries, including food, shelter, water, sanitation, hygiene, protection of vulnerable populations, health, and nutrition services. As of May 16, State PRM assumed responsibility for new disaster responses; USAID’s Disaster Assistance Response Team shut down soon after. State PRM assumed responsibility for new disaster responses, while State regional bureaus took over management of existing USAID BHA awards on June 15, according to USAID BHA.