Democracy Assistance: State Should Improve Accountability Over Funding; USAID Should Assess Whether New Processes Have Improved Award Documentation

Supporting efforts to promote democracy has been a foreign policy priority for the U.S. government. In recent years, USAID and State have allocated about $2 billion per year toward democracy assistance overseas. Congress required USAID and State to each establish guidelines for and report on the use of contracts, grants, and cooperative agreements for certain democracy programs.

GAO was asked to review U.S. democracy assistance. This report (1) examines funding USAID, NED, and State obligated for democracy assistance primarily through contracts, grants, and cooperative agreements and (2) evaluates documentation of USAID award-type decisions, among other objectives.

GAO analyzed USAID, NED, and State democracy assistance award data for fiscal years 2012–2016. GAO also reviewed relevant regulation and agency policies and analyzed documentation for a nongeneralizable sample of USAID awards selected based on factors such as award type, program area, and country.

In fiscal years 2012–2016, the U.S. Agency for International Development (USAID) obligated $5.5 billion and the National Endowment for Democracy (NED) obligated $610.2 million in democracy assistance funding. The total funding the Department of State (State) obligated for democracy assistance could not be reliably determined. One-third of all USAID obligations were provided through public international organizations (PIOs), which under USAID guidance are composed principally of countries or other organizations designated by USAID; 94 percent of PIO obligations were provided to the World Bank for democracy assistance projects in Afghanistan. The remaining two-thirds of USAID obligations were provided through contracts, grants (excluding PIOs), and cooperative agreements. Of the 10 State bureaus providing democracy assistance, 3 were unable to provide reliable funding data for fiscal years 2012–2016. Data from these bureaus were incomplete, nonstandard, or inaccurate. Federal internal control standards call for agencies to use quality information from reliable sources to achieve intended objectives and to monitor activities. Without such data, State cannot effectively monitor its democracy assistance programming and report reliable data externally.

For the awards GAO sampled, USAID generally did not document decisions about whether to award a contract, grant, or cooperative agreement (known as award-type decisions) in a complete and timely manner. According to applicable USAID guidance, agency officials were required to (1) document the final award-type decision with their written determination, including a rationale based on the requirements of the Federal Grant and Cooperative Agreement Act, and (2) complete this documentation before award solicitation occurs or, for noncompetitive awards, before USAID initiated communications with a potential sole-source awardee. However, USAID provided both complete and timely documentation of the award-type decision for 5 of the 41 awards GAO sampled. For the remaining 36 awards, the documentation was either incomplete, not timely or timeliness was indeterminate, or both (see table). While USAID has taken steps to improve documentation for award-type decisions by updating its guidance and templates, it has not assessed whether these updates have resulted in complete and timely documentation. It is important that USAID document these decisions in advance of solicitation because the selection of an award type may affect requirements for administering the award, including competition and oversight requirements and whether or not profit is permissible.

State should improve the reliability and completeness of its democracy assistance funding data, and USAID should assess whether steps taken are resulting in complete and timely documentation of democracy assistance award-type decisions. State and USAID concurred with GAO's recommendations and described actions planned or under way to address them.

Supporting efforts to promote democracy throughout the world has been  a long-standing foreign policy priority for the U.S. government. In fiscal  years 2012 through 2016, the U.S. Agency for International Development  (USAID) and the U.S. Department of State (State) have allocated about  $2 billion per year toward democracy assistance activities related to rule  of law and human rights, good governance, political competition and  consensus-building, and civil society. USAID, the National Endowment  for Democracy (NED), and State are largely responsible for providing this  assistance. These agencies carry out this responsibility through a variety  of implementing partners, including for-profit and nonprofit organizations.

USAID, NED, and State provide democracy assistance primarily through  three types of awards: contracts, grants, and cooperative agreements.  One of the stated purposes of the Federal Grant and Cooperative  Agreement Act of 1977 was to promote increased discipline in the  selection and use of types of contracts, grants, and cooperative  agreements. Nevertheless, award-type decisions by federal agencies have been the subject of litigation in federal court in the past. Recently,  Congress required USAID and State to each establish guidelines for  clarifying program design and objectives for democracy programs,  including the use of contracts versus grants and cooperative agreements  in the conduct of certain democracy programs. Congress also required  USAID and State to report on their use of these three award types for  democracy programs.

You asked us to review U.S. democracy assistance provided through  various types of awards. This report (1) examines funding USAID, NED,  and State obligated for democracy assistance primarily through contracts,  grants, and cooperative agreements; (2) evaluates documentation of  USAID award-type decisions; and (3) compares USAID contracts with  grants and cooperative agreements across selected award elements.

To examine funds obligated by USAID, NED, and State for democracy  assistance by award type, we obtained and analyzed data on awards that  USAID, NED, and State administered during fiscal years 2012 through  2016 under the Democracy, Human Rights, and Governance (DRG)  portfolio. We assessed the reliability of these data by reviewing related  documentation; interviewing knowledgeable officials; and conducting  electronic or manual data testing for missing, nonstandard, or duplicative  data; among other things. We determined that data provided by USAID,  NED, and State, except for data from State’s Bureau of International  Narcotics and Law Enforcement Affairs (INL), State’s Bureau of European  and Eurasian Affairs (EUR), and State’s Bureau of South and Central  Asian Affairs (SCA), were sufficiently reliable for the purposes of our  report. For the USAID, NED, and State data that were sufficiently  reliable, we analyzed the amount of funding by award type, among other  variables. We assessed State’s data reliability challenges against criteria  for using quality information in federal internal control standards.

To evaluate USAID’s award-type decisions, we reviewed relevant  regulations and agency policies. We also selected a roughly  proportional, random, nongeneralizable sample of 41 awards—13  contracts, 5 grants, and 23 cooperative agreements—from USAID’s  total population of 1,733 contracts, grants, and cooperative agreements.  We selected these 41 awards based on key characteristics such as  award type, DRG program area, and place of performance. The sample  was drawn from awards for the 14 countries for which USAID obligated  the most democracy funding. Democracy assistance projects in these  countries received over 70 percent of USAID’s democracy assistance  funding. For the selected awards, we obtained and analyzed  documentation relevant to the award-type decision.

To compare USAID contracts with grants and cooperative agreements,  we selected key award elements—competition, cost sharing and profit,  scope of work, and oversight requirements—to examine based on  consultations with acquisition and assistance subject matter experts. We  conducted a review of documentation associated with the same sample of  41 USAID awards we reviewed to evaluate award-type decisions. Using  information collected from the documentation, we analyzed the selected  awards’ competition (if any), cost sharing and profit (if allowed), scope of  work, and selected oversight activities. For more details on our scope and  methodology, see appendix I, and for more information on the 14  countries for which USAID obligated the most democracy funding, see  appendix II. We conducted this performance audit from July 2016 to  December 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.

The U.S. government supports various types of democracy assistance  activities, which USAID and State categorize under the DRG portfolio.  USAID and State use their Updated Foreign Assistance Standardized  Program Structure and Definitions to categorize and define DRG program  areas. As updated in April 2016, this document defines the aims of DRG  as “to advance freedom and dignity by assisting governments and  citizens to establish, consolidate, and protect democratic institutions,  processes, and values, including participatory and accountable  governance, rule of law, authentic political competition, civil society,  human rights, and the free flow of information.” Prior to the 2016 update,  DRG program areas were (1) rule of law and human rights, (2) good  governance, (3) political competition and consensus-building, and (4) civil  society. Each program area features different program elements, as  shown in table 1.

USAID, NED, and State Roles and Responsibilities Related to Democracy Assistance Overseas

Multiple bureaus and offices in USAID and State, as well as NED, provide  funding for democracy assistance programs, as shown in table 2. USAID  provides democracy assistance through contracts, grants, and  cooperative agreements, while NED provides democracy assistance only  through grants. INL was the only State bureau that reported providing a  significant amount of democracy assistance through contracts in addition  to grants and cooperative agreements, while other bureaus primarily use  grants and cooperative agreements.

USAID, NED, and State Democracy Assistance Funding during Fiscal Years 2012 through 2016

Combined allocations for democracy assistance administered by USAID  and State ranged from about $2 billion to about $3 billion per year, and  NED funding ranged from about $100 million to about $170 million  annually during fiscal years 2012 through 2016, as shown in figure 1.

USAID’s and State’s combined allocations for democracy assistance  varied by account in fiscal years 2012 through 2016. Economic Support  Fund was the largest account ranging from 50 to 63 percent of the total in  fiscal years 2012 through 2016, as shown in figure 2.

Laws, Regulations, and Polices Relevant to Award- Type Decisions

The following laws, regulations, and policies are related to agencies’  decisions to use a contract, grant, or cooperative agreement to implement  democracy assistance programming:

According to the Federal Grant and Cooperative Agreement Act of  1977, one of the purposes of the act is to promote a better  understanding of government expenditures and help eliminate  unnecessary administrative requirements on recipients of government  awards by characterizing the relationship between executive agencies  and contractors, states, local governments, and other recipients in  acquiring property and services and in providing government  assistance. The act provides agencies with criteria to be considered  when making award-type decisions, including the intended nature of  the relationship between the agency and recipient, as well as whether  the principal purpose of the award is to benefit the federal government  or to transfer a thing of value to a recipient to carry out a public  purpose of support or stimulation authorized by law.

The Competition in Contracting Act of 1984 requires agencies to  obtain full and open competition for contracts through the use of  competitive procedures in procurements unless otherwise authorized  by law.

The Federal Acquisition Regulation (FAR) establishes uniform policies  and procedures for all executive agencies for acquisition through  contracts. For example, the FAR includes policies and procedures to  promote the requirement to obtain full and open competition for  contracts. It defines the circumstances under which it is permissible  for agencies to limit competition for contracts, including when there is  an unusual or compelling urgency or when doing so is necessary for  reasons of public interest or national security.

The Office of Management and Budget’s “Uniform Administrative  Requirements, Cost Principles, and Audit Requirements for Federal  Awards,” as codified in the Code of Federal Regulations (C.F.R.),  establishes government-wide requirements for federal agencies  administering grants and cooperative agreements with nonfederal  entities.  This regulation includes policies and procedures for award  elements, including monitoring and reporting as well as cost sharing.

USAID established agencywide guidance for making award-type  decisions in its Automated Directives System (ADS), Chapter 304  (ADS 304). In addition to referencing the criteria established in the  Federal Grant and Cooperative Agreement Act, this ADS guidance  lists indications for when a specific award type should be used and  also identifies factors that should not be primary considerations in  making award-type decisions. According to USAID guidance,  agreement officers and contract officers are individuals representing  the U.S. government who are responsible for documenting the final  determination of award-type decisions. USAID further outlines policies  and procedures for administration of grants and cooperative  agreements in ADS Chapter 303 (ADS 303) and for contracts in ADS  Chapter 302 (ADS 302).

State also established agencywide guidance for making award-type  decisions in its Federal Assistance Directive. It references relevant  legislation and instructs contracting and agreement officers to consult  with State’s Office of the Procurement Executive if disagreements  regarding award-type decisions arise.

The Consolidated Appropriations Act, 2016, required USAID and  State to each establish guidelines for clarifying program design and  objectives for democracy programs, including the use of contracts  versus grants and cooperative agreements, for programs carried out  with funds appropriated by the act. For more information on USAID  and State guidance related to award-type decisions, see appendix III.

USAID’s Award Process and Award Life Cycle

USAID officials are to make award-type decisions based on applicable  laws, regulations, and policies, some of which are described above.  Figure 3 provides an overview of the considerations in making this  determination based on USAID guidance.

ADS 304 provides the following definitions and guidance to USAID  personnel as to what award type to select:

A contract is a mutually binding legal instrument in which the principal  purpose is the acquisition, by purchase, lease, or barter, of property or  services for the direct benefit or use of the federal government, or in  the case of a host country contract, the host government agency that  is a principal, signatory party to the instrument. According to ADS 304,  USAID personnel shall use a contract when the principal purpose of  this legal relationship is the acquisition of property or services for the  direct benefit of a federal government agency.

A grant is a legal instrument used when the principal purpose is the  transfer of money, property, services or anything of value to a  recipient in order to accomplish a public purpose of support or  stimulation authorized by Federal statute and when substantial  involvement by USAID is not anticipated. USAID personnel are  instructed to use a grant when the principal purpose of the  relationship with an awardee is to transfer money, property, services,  or anything of value to that awardee to carry out a public purpose of  support or stimulation authorized by federal statute; and the agency  does not anticipate substantial involvement between itself and the  awardee during the performance of the activity.

A cooperative agreement is a legal instrument used when the  principal purpose is the transfer of money, property, services, or  anything of value to a recipient in order to accomplish a public  purpose of support or stimulation authorized by federal statute and  when substantial involvement by USAID is anticipated. According to  ADS 304, USAID personnel must use a cooperative agreement when  the principal purpose of the relationship with an awardee is to transfer  a thing of value to that awardee in order to carry out a public purpose;  and the agency anticipates substantial involvement between itself and  the awardee during the performance of the activity. The active  engagement of USAID officials with awardees in certain programmatic  elements of a project constitutes substantial involvement. Such  activities include approval of the awardee’s implementation plan and  of specified key personnel.

In addition to awarding contracts, grants and cooperative agreements  to private organizations (such as a for-profit business or a  nongovernmental organization), USAID makes awards to federal  agencies and public international organizations. Under USAID  guidance, a public international organization is an international  organization composed principally of countries or other related  organizations designated by USAID. USAID maintains a list of public  international organizations and international agricultural research  centers that are considered public international organizations. These  organizations include the United Nations and related organizations,  such as the Food and Agriculture Organization, and international  financial institutions, such as the World Bank Group. USAID officials  noted that public international organizations normally receive grants.

Under USAID guidance, awards to public international organizations  and interagency agreements do not require the same award-type  decisions as those required by ADS 304 for contracts, grants, and  cooperative agreements. Awards made to public international  organizations are governed by USAID guidance separate from the  guidance that applies to awards to other types of organizations, and  interagency agreements are governed by guidance separate from  contracts, grants, and cooperative agreements.

According to USAID’s guidance, the award-type decision should occur  early in the preaward stage within the life cycle of an award. Award type- decisions impact other elements of awards because different regulations  and guidance are applicable based on award type. For example,  competition and oversight requirements differ for contracts compared with  grants and cooperative agreements. Similarly, award-type decisions  affect whether the recipient of an award is eligible to make a profit. The  award life cycle contains preaward and award implementation stages, as  shown in figure 4.

USAID Obligated $5.5 Billion and NED Obligated $610.2 Million in Democracy Assistance Funding; Total Funding State Obligated Cannot Be Reliably Determined

During fiscal years 2012 through 2016, USAID obligated $5.5 billion and  NED obligated $610.2 million in democracy assistance funding, and the  total such funding that State obligated cannot be reliably determined. In  providing democracy assistance, USAID obligated more through grants  and cooperative agreements combined than contracts, but its obligations  through different award types varied by fiscal year and DRG program  area. NED provided democracy assistance only through grants, and its  obligations remained generally constant by fiscal year but varied by DRG  program area. State bureaus that were able to provide reliable data  provided democracy assistance primarily through grants and cooperative  agreements. INL was the only State bureau that reported providing a  significant amount of democracy assistance through contracts in addition  to grants and cooperative agreements, but INL was one of the three State  bureaus unable to provide reliable data.

USAID Obligated $5.5 Billion in Democracy Assistance through Contracts, Grants, and Cooperative Agreements

USAID Obligated About Two- Thirds of Its Democracy Assistance Funding through Contracts and Cooperative Agreements, and One-Third through Grants to Public International Organizations

USAID obligated $5.5 billion in democracy assistance funding during  fiscal years 2012 through 2016, about 31 percent through contracts;  about 33 percent through cooperative agreements; about 4 percent  through grants, excluding grants to public international organizations  (PIO); and about 32 percent through grants to PIOs. Of the $5.5 billion in  democracy assistance, USAID obligated over $1.7 billion of all its  democracy assistance through grants to PIOs. The three countries for  which USAID obligated the most funds for democracy assistance projects  were Afghanistan, Iraq, and South Sudan. Democracy assistance  projects in Afghanistan received over $2 billion or 37 percent of USAID’s  total democracy assistance obligations during fiscal years 2012 through  2016. Moreover, two grants to the World Bank for the Afghanistan  Reconstruction Trust Fund totaling $1.5 billion during fiscal years 2012  through 2016 accounted for 85 percent of the total democracy assistance  funds USAID obligated through grants to PIOs during that period.

For both total obligations and number of awards, USAID awarded more of  its democracy assistance through grants and cooperative agreements  combined than through contracts, as shown in figure 5.

Contracts and cooperative agreements each accounted for roughly one- third of total obligations, while grants, excluding those to PIOs, accounted  for 4 percent of total obligations during fiscal years 2012 through 2016.  Excluding grants to PIOs, the number of grants and obligations for grants  on average were significantly less than cooperative agreements, as  shown in table 3.

USAID’s democracy assistance obligations through contracts, grants, and  cooperative agreements have varied during fiscal years 2012 to 2016,  with significant increases in USAID’s obligations through grants to the  World Bank in fiscal years 2012 and 2015, as shown in figure 6. These  increases were driven by two large grants to the World Bank for the  Afghanistan Reconstruction Trust Fund. Specifically, the World Bank  received more than $820 million in fiscal year 2012 and more than $360  million in fiscal year 2015. During fiscal years 2012 to 2016, the World  Bank accounted for 93 percent of grants to PIOs. For more details on  USAID obligations through different award types by fiscal year and DRG  program area, see appendix IV.

USAID’s democracy assistance obligations for good governance varied  the most compared with the other three DRG program areas, rule of law  and human rights, political competition and consensus-building, and civil  society, as shown in figure 7. This variation was again due to two large  grants to the World Bank for the Afghanistan Reconstruction Trust Fund,  which were categorized under good governance.

As shown in figure 8, USAID provided more democracy assistance in the  area of good governance, over $2 billion more than the next largest  program area. Excluding USAID obligations through grants to PIOs,  USAID obligated more democracy assistance through contracts than  through grants and cooperative agreements combined for the two  program areas of good governance and rule of law and human rights. For  the two other program areas—civil society and political competition and  consensus-building—USAID obligated less through contracts.

NED Obligated Over $610.2 Million in Democracy Assistance Funding through Grants

NED obligated over $610.2 million in democracy assistance funding  through a single award type—grants—during fiscal years 2012 through  2016. The three countries for which NED obligated the most funds for  democracy assistance are in Eurasia and Asia. NED’s obligations  remained generally constant in the past few fiscal years, as shown in  figure 9.

NED’s approved funding varied across the four DRG program areas.  According to NED officials, NED does not maintain obligations data for  awards by DRG program areas, as defined by USAID and State.  Therefore, NED categorized its grants into DRG program areas for  projects when funds were approved rather than when funds were  obligated to provide a general sense of funding by DRG program area.  NED approved the most funding in the area of good governance followed  closely by political competition and consensus-building and then by civil  society. NED’s approved funding in all program areas, except for civil  society, increased over the years, as shown in figure 10.

State Reported Obligating About $3 Billion in Democracy Assistance through Grants, Cooperative Agreements, and Contracts, but Data for Roughly Half of State’s Obligations Were Unreliable

State reported obligating approximately $3 billion in democracy  assistance funding during fiscal years 2012 through 2016 primarily  through grants and cooperative agreements, but also through contracts.  Seven of 10 State bureaus that were able to provide reliable data  obligated $1.7 billion primarily through grants and cooperative  agreements; the remaining three bureaus that were unable to provide  reliable data reported obligating about $1.4 billion through all three award  types.

Seven State Bureaus Providing Reliable Data Obligated $1.7 Billion in Democracy Assistance Funding Primarily through Grants and Cooperative Agreements

The seven State bureaus that were able to provide reliable data  collectively obligated $1.7 billion for fiscal years 2012 through 2016  primarily through grants and cooperative agreements, as shown in table  4. Of these State bureaus, the Bureau of Democracy, Human Rights,  and Labor obligated the most with about $1.2 billion in democracy  assistance through 547 grants and 56 cooperative agreements for that  period. The three regions for which the Bureau of Democracy, Human  Rights, and Labor obligated the most funds for democracy assistance  were the Near East, East Asia and Pacific, and the Western Hemisphere.

Three State bureaus—INL, EUR, and SCA—were unable to provide  reliable data on democracy assistance obligations for fiscal years 2012  through 2016. Collectively, these three bureaus reported obligating about  $1.4 billion in democracy assistance during this period: INL, about $1.1  billion; EUR, about $150 million; and SCA, about $160 million. INL was  the only State bureau that reported providing a significant amount of  democracy assistance through contracts in addition to grants and  cooperative agreements.

We deemed data from these three bureaus unreliable because the data  were incomplete, nonstandard, or inaccurate. For example, INL did not  provide democracy assistance data for Colombia, Egypt, and Kenya until  we identified these countries as potentially missing based on our  comparison of INL data with USAID data. According to data INL  subsequently provided, the democracy assistance projects in these three  countries received about $49 million of the approximately $1.1 billion in  democracy assistance obligated by INL in fiscal years 2012 through 2016.  According to INL officials, the initial data INL provided did not include  records of awards for these countries because awards were miscoded  when the data were entered; for example, some awards were coded  under the broad category of law enforcement rather than under specific  DRG program areas. According to INL officials, this erroneous law  enforcement code was used for all of Colombia’s programs and for some  programs in other countries such as Egypt and Kenya. According to INL  officials, for two additional countries, Tunisia and Morocco, the regional  post did not always use codes associated with DRG program areas or  personnel entered incorrect codes.

INL also provided incomplete data for multiple data fields, including the  dates for periods of performance. INL was missing the start date for 74  percent of records and the end date for almost 75 percent of records for  fiscal years 2012 through 2015. A September 2014 State Office of  Inspector General report on INL found, among other things, that because  State’s budgeting and accounting systems are not designed to manage  foreign assistance, INL staff were required to engage in time-consuming,  inefficient, and parallel processes to track the bureau’s finances.  According to INL officials, INL has made improvements in its data since  the Inspector General report was published. However, INL was missing  the start date for 69 percent of records and the end date for almost 71  percent of records for fiscal year 2016. According to INL, data fields such  as these were incomplete because contract officers and agreement  officers were not required to enter values for these data fields into State  systems until October 2016.

EUR and SCA also initially provided incomplete, inaccurate, or  nonstandard data for multiple data fields. According to State officials, this  was due to manual data entry and transfer errors. For example, dates  were in various formats and recipient names were sometimes listed in the  field intended for recipient categories, which did not allow for the  systematic analysis of records. While EUR generally provided more  complete and standard data for fiscal year 2016 compared with fiscal  years 2012 through 2015, EUR still provided nonstandard codes to  identify award subtype for 5.3 percent of its fiscal year 2016 records. For  example, “ESF,” an abbreviation for the Economic Support Fund, was  listed as the award subtype for multiple contracts.

Furthermore, we identified 145 duplicate EUR records. EUR officials in  Washington, D.C., noted that some of the duplicates resulted from their  efforts to validate the data they had collected from staff in each country.  Subsequently, these officials—who manually merged, analyzed, and  validated data to correct it—identified additional duplicates beyond the  145 that we had identified. According to EUR officials, the bureau’s  obligation data for democracy assistance awards were maintained in separate databases at posts, rather than in a centralized database. In  validating the data they had collected, EUR officials identified duplicate  records amounting to at least 5 percent of the records during fiscal years  2012 through 2016. On the basis of our independent analysis of the same  dataset, we were able to confirm that about 4 percent of the EUR records  were duplicate records. Data on democracy assistance awards are  maintained in the countries where the awards are made. To obtain award  level data, EUR headquarters personnel had to ask staff in each country  to manually compile and report award data.

In addition, SCA did not initially provide data for Afghanistan and  Pakistan, including award-type data. Records associated with these two  countries accounted for about 92 percent of SCA’s total democracy  assistance funding. We identified these countries as potentially missing  based on our comparison of SCA data with USAID data. SCA  subsequently provided the missing data on democracy assistance awards  made in Afghanistan and Pakistan; the data resided within a separate  database.

SCA democracy assistance awards are allocated across three offices  within SCA and EUR, and information regarding democracy assistance  programs is not currently managed through a centralized database.  According to SCA officials, due to the lack of a centralized database, they  would need to carefully coordinate across the three offices. However,  despite the coordination efforts of these offices, SCA did not include  Afghanistan and Pakistan in their initial submission of data to us, and the  additional data SCA subsequently submitted through EUR for Central  Asia still contained nonstandard and missing values.

A June 2017 State Office of Inspector General report determined that  State cannot obtain timely and accurate data necessary to provide central  oversight of foreign assistance activities and meet statutory and  regulatory reporting requirements. For example, the report said that  State cannot readily analyze its foreign assistance by country or  programmatic sector. Similarly, we found that State cannot readily  analyze its foreign assistance agencywide by country or for its DRG  portfolio since INL, EUR, and SCA did not provide reliable DRG award  data, including incomplete or duplicative data associated with certain  countries. According to the report, this lack of data hinders State’s  leadership from strategically managing foreign assistance resources,  identifying whether programs are achieving their objectives, and  determining how well bureaus and offices implement foreign assistance  programs. In September 2014, State began the Foreign Assistance Data  Review to better understand and document issues with its agencywide  data and multiple budget, financial, and program management systems,  but State does not plan to complete its Foreign Assistance Data Review  until fiscal year 2021. The Consolidated Appropriations Act, 2016,  requires State to report on its use of the various award types, and the  Office of Management and Budget’s Bulletin No. 12-01 requires State to  report quarterly on its foreign assistance activities. Given these  reporting requirements, State would not be able to provide accurate and  complete data on democracy assistance unless INL, EUR, and SCA took  immediate steps to address their data deficiencies. Federal internal  control standards call for agencies to use quality information from reliable  sources to achieve intended objectives and to effectively monitor  activities. Without reliable democracy assistance data from all relevant  bureaus, State cannot effectively monitor its democracy assistance  programming and report reliable data externally.

USAID Generally Lacked Complete and Timely Documentation of Award-Type Decisions

USAID generally did not document award-type decisions in a complete  and timely manner for the awards in our sample. Specifically, USAID  provided complete and timely documentation of the award-type decision  for 5 of the 41 awards we reviewed. For the remaining 36 awards, the  documentation was either incomplete, not timely, or both. According to  ADS 304, contract and agreement officers must determine whether to use  a contract, grant, or cooperative agreement, including a rationale based  on criteria outlined in the Federal Grant and Cooperative Agreement Act.

USAID Did Not Have Complete Documentation of Award-Type Decisions for 14 of the 41 Awards in Our Sample

Consistent with the requirements of ADS 304, USAID personnel  documented the rationale for using a contract, grant, or cooperative  agreement for 27 of the 41 awards we reviewed. As table 5 shows, the  number of awards in our sample with complete and incomplete  documentation of the award-type decision varies by award type.

ADS 304 requires contract and agreement officers to document the  selection of an award type, including the rationale for the award-type  decisions based on the requirements of the Federal Grant and  Cooperative Agreement Act. USAID provided documentation of the  award-type decision for 31 of the awards in our sample but lacked such  documentation for 10 awards. However, for 4 of the 31 awards with  documentation of the award-type decision, the documentation was not  complete because it did not include a rationale for choosing between  grants, cooperative agreements, and contracts on the basis of criteria in  the Federal Grant and Cooperative Agreement Act, as required by USAID  guidance.

The documentation of the award-type decision for these 4 awards, which  were all contracts, outlined the rationale for selecting a particular type of  contract, information that is required by the FAR. However, the  documentation for these 4 awards did not address the decision to use a  contract rather than a grant or cooperative agreement, including a  rationale based on the requirements outlined in the Federal Grant and  Cooperative Agreement Act, as required by ADS 304. For example,  documentation for one contract provided a rationale for selecting a firm- fixed-price contract based on the level of risk, which is in accordance with  requirements of the FAR. However, the documentation did not indicate  the rationale for deciding to use a contract rather than a grant or  cooperative agreement as required by ADS 304. Without documentation  of the rationale for award-type decisions as required under USAID  guidance, USAID cannot demonstrate that award-type decisions are  made based on the requirements outlined in the Federal Grant and  Cooperative Agreement Act.

USAID Lacked Timely Documentation of Award- Type Decisions for 25 of the 31 Awards for Which It Provided Documentation

For the 31 awards in our sample for which USAID provided  documentation of the award-type decision, 6 met the timeliness standard  set by USAID guidance, and 25 did not, as shown in table 6. While 5  award-type decisions were both timely and complete, one award that met  the timeliness standard lacked a required component.

According to ADS 304, contract and agreement officers must document  the final award-type decision before a solicitation is issued or before  USAID initiates communications with a potential sole source recipient.  We found that 25 awards lacked timely documentation of the award-type  decision because the decision was documented after the solicitation was  issued or timeliness was indeterminate because the documentation  lacked a date or other indication of when in the process this determination  was documented. Without this, we could not determine whether the  award-type decisions were documented prior to solicitation or before  USAID initiated communications with a potential sole source recipient.  Instances in which final award-type decisions were documented after the  issuance of a solicitation or communication with a potential sole source  recipient include the following:

Solicitation for one of the contracts in our sample occurred in 2011,  but the award-type decision was not documented until 2013.

The award-type decision for one of the grants in our sample was  documented after the grant was awarded, which occurs after the  solicitation is issued.

Solicitation for one cooperative agreement in our sample occurred in  2010, but the award-type decision was not documented until 2012.

According to USAID officials, the agency’s practice prior to October 2016  was to include award-type decisions in a comprehensive document that  was intended to record all key decisions made throughout the award  process. This document was finalized at the end of the award process.  However, USAID officials also stated that they have introduced new  processes and procedures, including making updates to relevant  guidance, templates, and instructions that they believe will result in more  timely and complete documentation of award-type decisions. Specifically,  in 2016 USAID issued an update to ADS 304 that includes examples of  when to use contracts, grants, and cooperative agreements and provides  additional information about the legal framework for making award-type  decisions. In 2017, USAID also issued revised templates to guide the  documentation of award-type decisions. According to USAID officials, in  addition to clarifying the ADS 304 guidance and developing new  templates, USAID is also developing specific guidance for DRG programs  that it expects to release at a future date. For additional information about  this DRG-specific guidance, see app. III.

USAID has taken steps to improve documentation for award-type  decisions by updating its guidance and templates but has not assessed  whether these updates have resulted in timely and complete  documentation of award-type decisions. USAID officials stated that  assessments are conducted at the sub-bureau or mission level, rather  than by specific sectors, such as for DRG programs. As a result, USAID  officials do not have plans to assess whether the newly updated  processes and procedures have resulted in more timely documentation of  DRG award-type decisions. It is important that USAID document the  award-type decision before it publishes a solicitation for the award  because award-type decisions impact other award elements, such as the  requirements for competition and oversight and whether profit is  permissible under the award. Until USAID assesses its updated  processes and procedures, it cannot know if the steps it has taken have  resulted in complete and timely documentation of award-type decisions  as required by USAID guidance.

USAID Contracts Differed from Grants and Cooperative Agreements for Selected Award Elements

For the awards in our sample, contracts generally differed from grants  and cooperative agreements in terms of competition, scope of work, cost  sharing and profit, and oversight requirements, among other  characteristics. We identified differences in three award elements— competition, cost sharing and profit, and oversight requirements—that  were generally consistent with the unique requirements provided for in  procurement regulations and agency guidance. We also identified  differences between the award types with regard to scope of work, and  found certain activities were conducted under all three award types.

USAID Used Competition Procedures for a Greater Proportion of Contracts than for Grants and Cooperative Agreements in Our Sample, due to Differences in Award Types’ Applicable Legal Frameworks

USAID awarded most, but not all, of the contracts in our sample using full  and open competition, according to USAID data. Different federal and  USAID requirements are in place regarding the use of competition  procedures to award contracts than apply to grants and cooperative  agreements. In accordance with the FAR, executive agencies such as  USAID are required to promote and provide for full and open competition  in awarding contracts, with only limited exemptions.

USAID did not require full competition for any of the grants in our sample  and required it for only about one-third of the cooperative agreements,  according to USAID data. For the 41 awards in our sample, table 7 shows  how many of each award type used full competition, limited competition,  or no competition, based on USAID data.

Below are examples of the rationale USAID provided for limiting  competition for selected contracts, grants, and cooperative agreements:

USAID limited competition for one of the contracts in our sample  because of potential impairment to a foreign aid program, and another  contract was limited to local competitors. This exemption to full and  open competition is based on a unique statutory authority available to  USAID and other agencies operating foreign assistance programs,  which has been implemented in the USAID Supplement to the FAR.  USAID also exempted one of the contracts in our sample from full and  open competition using a provision in the FAR that allows for  solicitation from a single source when the purchase falls below a  threshold of $150,000. However, USAID officials indicated that they  erroneously cited FAR 13.106-1(b), which permits sole source awards  for acquisitions not exceeding the simplified acquisition threshold if  only one source is reasonably available, when they should have cited  FAR 13.501(a)(2)(i), which permits sole source acquisitions of  commercial items (including brand-name items) for acquisitions  greater than $150,000.

For two of the grants in our sample, USAID limited the awards to local  competition, according to USAID officials.

For one cooperative agreement in our sample, competition was  limited, according to USAID data, but USAID did not provide  additional information on how the award competition was limited. The  recipient of this award had submitted an unsolicited application, which  under ADS 303, may be included in a relevant competition for an  award, if USAID finds that the unsolicited application reasonably fits  an existing program. USAID found that this unsolicited application was  responsive to an existing solicitation and thus provided no additional  justification.

For more information on the rationales USAID used to exempt contracts,  grants, and cooperative agreements in our sample from full and open  competition, see appendix V.

Contracts More Often Included a Greater Number of Activities Working with Host-Country Governments or Other National Institutions, While Grants and Cooperative Agreements More Often Included a Greater Number of Activities Working with Civil Society Organizations

We found that the scope of work for contracts, grants, and cooperative  agreements included similar types of activities. We also found that  contracts more often included a greater number of activities working with  the host-country government or other major national institutions, and  grants and cooperative agreements more often included a greater  number of activities working with civil society organizations.

Seven of the 13 contracts in our sample included more activities focused  on engaging with host-country governments and national institutions,  while only 2 of the 13 contracts included more activities focused on  engaging civil society organizations. Grants and cooperative  agreements, by contrast, more often included a greater number of  activities to support civil society organizations and media organizations  than government or major national institutions of the country of  performance. Three of the 5 grants in our sample included more  objectives or activities focused on engaging civil society organizations,  rather than engaging with host government or other major national  institutions, while none of the grants included more objectives or activities  related to the host government or other major national institutions.  Cooperative agreements slightly more often included a greater number of  objectives or activities to engage civil society organizations than they did  to work with host government and national institutions, with 9 cooperative  agreements including more objectives or activities focused on engaging  civil society organizations and 7 with more objectives or activities focused  on engaging host governments or other national institutions.

Below are some examples of the activities and types of parties engaged  with as stated in the awards in our sample:

One contract in our sample provided various advisors to assist the  government of a foreign country in implementing transparent policies,  laws, and systems to strengthen public financial management and  provide for a well-regulated financial sector, among other things. For  more information on program objectives for selected democracy  assistance awards by contract type, see appendix VI.

A grant in our sample sought to increase the capacity of civil society  organizations and the media to promote transparent democratic  elections and political processes, among other things. Activities under  the scope of work for this award included building alliances with  stakeholders, conducting election-day observations, and analyzing  electoral results.

A cooperative agreement in our sample was intended to support a  political transition through, among other things, organizational  capacity development and grant-making opportunities for civil society  organizations working to raise awareness about electoral events.

In addition, for our award sample, we found that activities such as  technical assistance, training, and local capacity building were conducted  under grants, cooperative agreements, and contracts.

Estimated Profits Ranged from 1 to 6 Percent of Estimated Contract Cost; Cost Sharing Ranged from Less Than 1 to 74 Percent of Total Value of Grants and Cooperative Agreements

Eight of the 13 contracts in our sample were cost-plus-fixed-fee contracts,  under which the contractor is reimbursed its costs in implementing the  program in addition to a fee (profit) that is fixed at the outset. For these  8 contracts, the estimated percentage of profit ranged from about 1 to 6  percent of the estimated contract cost. According to the FAR, under  cost-plus-fixed-fee contracts, the fee cannot exceed 10 percent of the  contract’s estimated cost excluding fee. The average estimated fixed fee  percentage for these contracts was about 5 percent of the estimated  contract cost.

While USAID contracts may be structured to provide for contractor profit  in accordance with the FAR, USAID guidance does not allow profit under  grants and cooperative agreements. For the grants and cooperative  agreements in our sample, the awards did not specifically provide any fee  (profit), and the awardees often agreed to contribute to the cost of the  program through cost sharing. In addition, USAID guidance identifies  cost sharing—whereby an awardee contributes to the total cost of an  agreement—as an important element of the USAID-awardee relationship  for grants and cooperative agreements. According to this guidance,  although there is no general requirement for the awardees of grants and  cooperative agreements to share in providing the costs of programs, cost  sharing can be a mechanism to help awardees build their organizational  capacity. For the awards in our sample, USAID included provisions for  cost sharing in 3 of the 5 grants, and the awardees agreed to contribute  about 11 percent, 13 percent, and 74 percent of the respective total  award funding, including the cost share amount. USAID also included  cost sharing provisions in 10 of the 23 cooperative agreements, with the  awardee contribution ranging from less than 1 percent to 36 percent of  the total award funding, including the cost share amount. All of the grants  and cooperative agreements that included cost sharing provisions were  awarded to nonprofit organizations, according to USAID data. Some of  these awardees agreed to contribute to cost sharing by covering in-kind  costs, such as donated time from volunteer legal specialists, and others  agreed to contribute cash to cover some of the direct costs of  implementing programs, such as personnel and benefits.

According to USAID officials, cost sharing is rarely used under USAID  contracts because under a cost sharing contract the contractor agrees to  absorb a portion of its costs in expectation of substantial compensating  benefits, such as certain research and development efforts, and these  circumstances rarely occur under USAID’s programming. USAID did not  include cost sharing provisions in any of the 13 contracts in our sample.  For additional information about profit in our sample, see table 8.

Table 9 provides additional information about cost sharing under the  awards in our sample.

Below are some examples of profit and cost sharing arrangements  included in contracts, grants, and cooperative agreements in our sample:

A contract in our sample sought to, among other things, improve the  access of vulnerable and disadvantaged populations to the country’s  legal system by engaging in activities such as working to build the  capacity of government and civil society organizations to be more  responsive to the needs of these populations. Under this award, the  contractor was to receive approximately $1.7 million in profit, which  was 4 percent of the estimated value of the award.

The awardee for a grant in our sample agreed to provide $2.1 million  of the program costs, about 74 percent of the total cost of the  program, which sought to develop public opinion survey research  capacity in the host country, among other things. USAID’s grant to this  awardee funded additional support for the program, which the  awardee was already executing prior to USAID assistance.

A cooperative agreement in our sample included a requirement for the  awardee to contribute about 9 percent of program expenditures, or  about $3 million, for a program that sought to improve access to  health services, as well as strengthen health delivery systems and  health governance.

Contracts Had Different Oversight and Evaluation Requirements Than Grants and Cooperative Agreements, due to Differences in Award Types’ Applicable Legal Frameworks

We found that USAID oversight requirements differed for contracts  compared with grants and cooperative agreements for the awards in our  sample. This is because contracts (1) at times required more frequent  reporting and (2) more often required evaluations of the contractor’s  performance.

Reporting requirements: We found that while most awards in our  sample required quarterly financial and performance reporting, some  contracts required these reports to be submitted monthly. USAID  required quarterly financial and performance reporting for the majority of  grants and cooperative agreements in our sample. None of the grants or  cooperative agreements in our sample included requirements for financial  reporting more frequently than quarterly, and no grants and only one  cooperative agreement included a more frequent performance reporting  requirement.

According to Title 2 of the Code of Federal Regulations (C.F.R.), Section  200.327, under grants and cooperative agreements, financial reports  must be collected by agencies with the frequency required by the award,  but no less frequently than annually and no more frequently than  quarterly, except in unusual circumstances, such as where more  frequent reporting is necessary for effective monitoring of the award.  USAID officials confirmed that there would have to be a reason to justify  quarterly or more frequent reporting requirements for grants or  cooperative agreements. For example, considerations related to risk  could result in the need for more frequent reporting for grants and  cooperative agreements.

Table 10 shows the financial and performance reporting requirements for  the contracts, grants, and cooperative agreements in our sample.

Evaluations of performance: For the majority of contracts in our  sample, USAID included provisions for evaluation of the contractor’s  performance at the conclusion of performance. According to the FAR,  evaluations of a contractor’s performance shall be prepared at the time  the work under the contract is completed, and, for contracts longer than 1  year, interim evaluations should be prepared at least annually. USAID  officials indicated that there is no similar government-wide or USAID  requirement for grants and cooperative agreements. None of the grants  and only a few of the cooperative agreements in our sample included  such evaluation provisions. However, USAID officials noted that, in  accordance with USAID policy, the past performance of a potential  awardee is considered in conducting risk assessments for grants and  cooperative agreements.

Table 11 shows the number of USAID contracts, grants, and cooperative  agreements in our sample that included provisions for evaluation of the  contractor or awardee’s performance.

For most of the contracts in our sample, award documentation indicated  that the contractor’s performance would be assessed on a variety of  factors such as quality of service, cost control, timeliness of performance,  and effectiveness of key personnel. These evaluations form the basis of  the contractor’s performance record for the contract. Only one contract in  our sample had no requirement for a performance evaluation of the  contractor, and that award was for the rental of a hotel ballroom and  related services for an event.

For three of the cooperative agreements in our sample that included  provisions for the evaluation of the awardee’s performance, the award  documentation indicated that USAID officials were to ensure prudent  management of the award and to make the achievement of program  objectives easier by, among other things, evaluating the awardee and its  performance. One cooperative agreement included a provision that  USAID will fund or conduct an external midterm evaluation during the  second year of the project. For the one remaining cooperative agreement  with an evaluation provision, documentation indicated that the evaluation  would be used to inform a decision about a potential follow-on award.

Democracy assistance has been a key component of U.S. foreign  assistance, supporting activities related to rule of law and human rights,  good governance, political competition and consensus-building, and civil  society. USAID and State together have allocated about $2 billion  annually for democracy assistance in fiscal years 2012 through 2016.  USAID’s information systems enable it to track and report the amount of  democracy assistance funding through contracts, grants, and cooperative  agreements. However, State lacks the ability to provide comparable  agencywide data. The quality of democracy assistance award data  provided by 10 State bureaus and offices varied, and three of these  bureaus were unable to provide reliable data. Of the State bureaus, INL is  the only bureau that regularly makes use of contracts, and it provided  unreliable data. Without reliable data from INL, State cannot accurately  report on its use of the various award types. In addition, since EUR’s and  SCA’s award data are maintained across embassies, offices, and the two  bureaus, opportunities for data errors may increase when regional data  needs to be compiled. Without reliable data from all relevant bureaus,  State cannot be sure that it is fully and accurately reporting on democracy  assistance awards, which limits, among other things, congressional  oversight of democracy assistance funding.

While USAID requirements for complete and timely documentation of  award-type decisions have existed since at least 2011, for our sample of  41 USAID awards for which an award-type decision was required, only 5,  or about 12 percent, had both complete and timely documentation of the  award-type decision. USAID recently introduced processes and  procedures to improve the documentation of these decisions. However,  until USAID assesses its updated processes and procedures, it cannot  know if the changes resulted in award-type decisions being documented  in a complete and timely manner, as required by its guidance, or if  additional steps are needed.

We are making three recommendations, two to State and one to USAID.

The Secretary of State should direct the Bureau of International Narcotics  and Law Enforcement Affairs to identify and address factors that affect  the reliability of its democracy assistance data, such as miscoded or  missing data. (Recommendation 1)

The Secretary of State should direct the Director of the Office of U.S.  Foreign Assistance Resources to implement a process to improve the  reliability, accessibility, and standardization of democracy assistance data  across the geographic regions of the Bureaus of European and Eurasian  Affairs and South and Central Asian Affairs, such as utilizing a centralized  database for award data. (Recommendation 2)

The USAID Administrator should direct the Office of Acquisition and  Assistance to assess whether current processes and procedures as  outlined in revised guidance result in complete and timely documentation  of award-type decisions for democracy assistance. (Recommendation 3)

We provided a draft of this report to State, USAID, and NED for review  and comment. State, USAID, and NED provided technical comments on  the draft, which we incorporated as appropriate. State and USAID also  provided written comments in letters that are reproduced in appendices  VII and VIII, respectively. In their written comments, both State and  USAID concurred with our recommendations. State also requested that  the report provide more information about its commitment and efforts to  improve accountability of foreign assistance under its Foreign Assistance  Data Review process. We have added more details about these efforts,  including a discussion of State’s recent report to Congress on the  outcomes of Phases One and Two of its four-phase review, which is  expected to be completed in fiscal year 2021. State’s letter also described  other efforts to improve the quality and accessibility of data at the bureau- level and at posts.

In its written comments, USAID stated that it will take steps to assess  documentation of award-type decisions and planned to complete this  assessment by September 30, 2018. USAID also underscored certain  details regarding required documentation of award-type decisions for  some awards in our sample of 41 USAID democracy assistance awards.  USAID noted that three contracts in our sample consisted of task orders,  which do not require award-type decision documentation separate from  their base awards under USAID guidance, according to agency officials.  The draft report included these details, and we added more information to  the report to further clarify them.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of State, the Administrator of the U.S. Agency  for International Development, and the President of the National  Endowment for Democracy. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IX.

Appendix I: Objectives, Scope, and Methodology

This report (1) examines funding that the U.S. Agency for International  Development (USAID), National Endowment for Democracy (NED), and  U.S. Department of State (State) obligated for democracy assistance  through contracts, grants, and cooperative agreements; (2) evaluates  USAID documentation of award-type decisions; and (3) compares USAID  contracts with grants and cooperative agreements across selected award  elements.

To examine funds obligated by USAID, NED, and State for democracy  assistance by award types, we obtained data on awards that USAID,  NED, and State administered during fiscal years 2012 through 2016  under the Democracy, Human Rights, and Governance (DRG) portfolio.  The data we obtained included awards to public international  organizations (PIO). However, awards to PIOs are governed by USAID  guidance separate from the guidance that applies to awards to other  types of organizations. The data we obtained also included interagency  agreements. However, interagency agreements are governed by  separate USAID guidance that does not require the same award-type  decision as when agencies obligate funds to entities through contracts,  grants, and cooperative agreements. We analyzed the award data for  fiscal years 2012 through 2016 but did not include fiscal year 2011 data in  our analysis because State did not consistently track obligations data at  the award level prior to fiscal year 2012, according to State officials. We  assessed the reliability of these data by reviewing related documentation;  interviewing knowledgeable officials; and conducting electronic or manual  data testing for missing, nonstandard, or duplicative data; among other  things. We determined that data provided by USAID, NED, and State,  except for data from State’s Bureau of International Narcotics and Law  Enforcement Affairs (INL), Bureau of European and Eurasian Affairs  (EUR), and Bureau of South and Central Asian Affairs (SCA), were  sufficiently reliable for the purposes of our report. For the USAID, NED,  and State data that were sufficiently reliable, we analyzed the amount of  funding by award type, among other variables. We assessed State’s data  reliability challenges against federal internal control standards.

To evaluate USAID’s award-type decisions, we reviewed relevant  regulations and agency policies, and we interviewed knowledgeable  agency officials about these polices. State and NED were not included in  our sample because most State bureaus did not regularly use all three  types of awards and NED only provides assistance through grants. In  addition, three State bureaus were unable to provide reliable data from  which to select a sample. We also selected a roughly proportional,  random, nongeneralizable sample of 41 awards—13 contracts, 5 grants,  and 23 cooperative agreements. These awards were selected based on  characteristics, such as award type, DRG program area, and place of  performance. The sample focused on the 14 countries for which USAID  obligated the most democracy funding. Democracy assistance projects in  these 14 countries received over 70 percent of USAID’s democracy  assistance funding. The sample was also limited to contracts, grants,  and cooperative agreements that were awarded by USAID in fiscal years  2012 through 2015 because fiscal year 2015 was the most recent fiscal  year for which data were available at the time of our sample selection. We  excluded (1) grants made to PIOs because these awards are governed  by USAID guidance separate from the guidance that applies to awards to  other types of organizations; (2) interagency agreements because  engaging other federal agencies through interagency agreements does  not require the same award-type decision under USAID guidance as  when agencies obligate funds to entities through contracts, grants, and  cooperative agreements; and (3) awards that fell below the simplified  acquisition threshold, which is $150,000, because there are different  acquisition procedures allowable for awards that fall below the threshold.  For the selected awards, we obtained and analyzed preaward  documentation relevant to the award-type decision and evaluated this  documentation against the relevant regulations and agency guidance. To  ensure accuracy, we cross-checked information from the documentation  for the selected awards with USAID’s award data.

In collaboration with subject-matter experts, we selected four award  elements—competition, cost sharing and profit, scope of work, and  oversight requirements—for a comparison of contracts with grants and  cooperative agreements. To compare USAID contracts with grants and  cooperative agreements across selected award elements, we obtained  and conducted a review of documentation associated with the same  sample of 41 USAID awards. Additionally, we obtained information about  award recipients from a public database maintained at SAM.gov. Using  information collected from the documentation, we analyzed the selected  awards’ competition, cost sharing and profit, scope of work, and oversight  activities. Subsequently, we reviewed the documentation and applicable  legal frameworks, including federal regulations and guidance pertaining to  the award elements we selected, to compare differences between award  types. We also interviewed relevant agency officials as well as the leading  industry organizations that represent implementers of foreign assistance  programs to better understand the use of various award types.

We conducted this performance audit from July 2016 to December 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Appendix II: USAID’s Use of Various Award Types for Democracy Assistance by Place of Performance during Fiscal Years 2012 through 2015

Our nongeneralizable sample of U.S. Agency for International  Development (USAID) awards was limited to fiscal years 2012 through  2015 and to the 14 countries for which USAID obligated the most  democracy funding, which accounted for over 70 percent of USAID’s  democracy assistance funding. Total USAID democracy assistance  funding for projects in Afghanistan was greater than for any other country,  amounting to almost 39 percent of USAID’s total democracy assistance  obligations during fiscal years 2012 through 2015. The total USAID  democracy assistance funding for projects in Afghanistan included  obligations to public international organizations (PIOs) of more than $827  million in fiscal year 2012, more than $55 million in fiscal year 2013, more  than $48 million in fiscal year 2014, and more than $369 million in fiscal  year 2015. USAID’s use of award types for democracy assistance varied  across these 14 countries during fiscal years 2012 through 2015, as  shown in figure 11.

Appendix III: USAID and State Guidance in Response to the Consolidated Appropriations Act, 2016

The Consolidated Appropriations Act, 2016, states that not later than 90  days after enactment of the act, the U.S. Department of State (State) and  U.S. Agency for International Development (USAID), following  consultation with democracy program implementing partners, shall each  establish guidelines for clarifying program design and objectives for  democracy programs, including the use of contracts versus grants and  cooperative agreements in the conduct of democracy programs carried  out with funds appropriated by the act. The joint explanatory statement  accompanying the act further elaborated that the act requires the  development of guidelines for the use of contracts versus grants and  cooperative agreements for the unique objectives of democracy  programs, and that the guidelines should assist contracting and  agreement officers in selecting the most appropriate mechanism for  democracy programs, among other things.

In 2016, USAID released its revised agencywide guidance, Automated  Directives System (ADS) Chapter 304 (ADS 304), on how to make award- type decisions between contracts, grants, and cooperative agreements.  According to USAID officials, USAID expects to release guidance further  clarifying ADS 304 at a future date. USAID intends to issue the guidance  after it completes final consultations with implementing partners, the  Congress, and other stakeholders. It includes scenarios and examples to  further clarify existing government-wide and agencywide guidance.  According to USAID officials, in drafting its guidance to further clarify ADS  304, USAID pursued multiple rounds of review within USAID, and with  implementing partners, the Congress, and other stakeholders.

According to State, it met the requirement to establish additional  guidelines for democracy assistance through State’s release of a  Program Design and Performance Management Toolkit in fall 2016 and  State’s updating of its Federal Assistance Directive in May 2017. The aim  of the Program Design and Performance Management Toolkit was to  clarify program design and objectives for foreign assistance programs  broadly. The Federal Assistance Directive combined both policies and  procedures from the Federal Assistance Policy Directive and the  Procedural Desk Guide into one document and clarified appropriate  mechanisms for all programs. Although applicable to democracy  programs, neither of these actions was specific to democracy programs.  According to State, the Bureau of Democracy, Human Rights, and Labor;  the Bureau of International Narcotics and Law Enforcement; and other  relevant State bureaus that work closely with democracy assistance  implementing partners consult regularly with and provide guidance to  implementing partners on the use of the guidelines.

Appendix IV: USAID Obligations through Different Award Types by Fiscal Year and Democracy, Human Rights, and Governance (DRG) Program Area

U.S. Agency for International Development (USAID) democracy  assistance obligations through different award types varied by fiscal year  and DRG program area, as shown in tables 12, 13, and 14.

Appendix V: Regulations and Policy Allowing USAID to Limit Competition for Contracts, Grants, and Cooperative Agreements

Regulations, law, and policy enable the U.S. Agency for International  Development (USAID) to limit competition in awarding contracts, grants,  and cooperative agreements under certain circumstances. One source of  USAID’s authority to limit competition for contracts is the Competition in  Contracting Act of 1984, as implemented in the Federal Acquisition  Regulation (FAR), which outlines policies and procedures for acquisition  by all federal agencies, including policies and procedures pertaining to  exemptions from competition. In addition, for contracts awarded under  USAID programs, the FAR, among other regulations and legislation,  contains specific provisions on exemptions from competition. For grants  and cooperative agreements, USAID’s Automated Directives System  Chapter 303 outlines circumstances under which competition can be  limited.

In accordance with applicable policies, procedures, and guidance, USAID  can use some exemptions from competition only for contracts and others  only for grants and cooperative agreements. For example, USAID can  limit competition for contracts for the sake of public interest or when  circumstances are such that competition would compromise U.S. national  security; however, according to USAID officials, they rarely have cause to  use these grounds for limiting competition. USAID guidance outlines  some unique exemptions to competition for grants and cooperative  agreements. For example, USAID can exempt follow-on awards, which  are the same or substantively similar to recently completed awards, if the  awardee will be the same, or can exempt awards from competition in  certain instances when USAID has received an unsolicited application.

For the awards in our sample, USAID limited competition for only 3 of the  13 contracts, based on USAID data. However, for one of these contracts,  USAID officials indicated that they erroneously cited FAR 13.106-1(b),  which permits sole source awards for acquisitions not exceeding the  simplified acquisition threshold if only one source is reasonably available,  when they should have cited FAR 13.501(a)(2)(i), which permits sole  source acquisitions of commercial items (including brand-name items) for  acquisitions greater than $150,000. For the exemptions from competition  that USAID used for these awards, see table 15.

USAID exempted from full competition all five of the grants and 15 of the  23 cooperative agreements in our sample. Table 16 outlines exemptions  from competition that USAID may use for grants and cooperative  agreements in our sample.

Appendix VI: Program Objectives of Selected USAID Democracy Assistance Awards by Contract Type

For the contracts in our sample, we found that program objectives varied  by type of contract. For example, the firm fixed price award and three of  the four indefinite quantity awards in our sample procured goods and  services with specific deliverables that were directly for the U.S. Agency  for International Development’s (USAID) benefit. Nearly all of the cost- plus-fixed-fee contracts sought to achieve improvements in the public  sector of the country of performance through activities such as supporting  developments in public policy or strengthening national institutions. For  examples of differences in program objectives by contract type in our  sample, see table 17.

Appendix VII: Comments from the U.S. Department of State

Appendix VIII: Comments from the U.S. Agency for International Development

Appendix IX: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Mona Sehgal (Assistant  Director), Justine Lazaro (Analyst-in-Charge), Lindsey Cross, Christopher  Hayes, Carl Barden, Karen Cassidy, David Dayton, Timothy DiNapoli,  Justin Fisher, Alexandra Jeszeck, Heather Latta, Madeline Messick,  Natarajan Subramanian, Alex Welsh, and Bill Woods made key  contributions to this report.

Promoting democracy abroad has been a long-standing U.S. priority.

We examined how much money U.S. agencies pledged for democracy assistance in fiscal 2012-2016 and how they awarded the funds.

We found USAID obligated $5.5 billion, but we could not determine a total for the State Department because some of its bureaus could not provide reliable data. In addition, in our sample we found USAID seldom documented award-related decisions in a complete and timely manner.

We recommended that State improve data reliability and that USAID assess whether its new processes are improving award documentation.