State and USAID struggle with contractors, putting billions at risk

Introduction

Obama’s budget request for State Department and USAID included an 8 percent increase over last year, up to $55.7 billion, but the GAO has found significant problems in both agencies’ management.

“GAO has consistently found limitations in the ability of State and USAID to ensure they are deploying the right people to the right places at the right time,” Jacquelyn Williams-Bridgers, director of international affairs at GAO, said in her statement before the House Committee on Appropriations.

State has faced persistent staffing and foreign language gaps regarding Arabic and Chinese speakers and regional specialists on the Near East, South and Central Asia. Shortfalls like these could jeopardize diplomatic readiness and hinder overseas operations.

State also modernized a number of embassies and has had difficulty hiring and training staff capable of operating its new, more sophisticated compounds.

Both State and USAID rely extensively on contractors for reconstruction efforts in Iraq and Afghanistan. The GAO has stressed concern about the lack of strong management and oversight over contractors, raising questions about the ability of either agency to ensure accountability for multibillion-dollar investments in the countries.

Since 2002, the United States has provided over $130 billion in security, economic and government assistance to Iraq, Afghanistan, and Pakistan.

The GAO recommends that both agencies assess the internal controls and financial management at nongovernmental organizations or government ministries prior to awarding funds and require organizations to address weaknesses.

FAST FACT: During fiscal year 2009 and the first half of 2010, State and USAID reported obligations of nearly $6 billion on contracts, grants, and cooperative agreements to support their personnel and development efforts in Iraq and Afghanistan.

Following are other new watchdog reports released by the Government Accountability Office (GAO), various federal Offices of Inspector General (OIG), and other government entities.

HEALTH CARE

• Medicare Part D sponsors reported receiving $6.5 billion in drug manufacturer rebates in 2008. Rebates can substantially reduce the cost of the Part D program. However, sponsors must report these rebates to the government in order to realize any savings. Sponsors underestimated rebates in 69 percent of their bids, increasing beneficiary premiums. (HHS Inspector General)

MISC.

• With increasing concern about the default and claim rates against the Federal Housing Agency insurance fund for failed loans, an investigation reveals 140 faulty loans resulted in losses to the insurance fund of over $11 million. Enforcement actions against lenders could total over $23 million. (HUD Inspector General)