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State Department’s Cash Cow

Federal Government

The U.S. State Department has been handing over billions of dollars in grants for foreign projects --

Ranging  from cultural exchanges to “climate change” activities -- without adequate oversight or adequate assessment of the risks involved, and sometimes without knowing whether the money was actually spent, according to the department’s Inspector General.

Moreover, these money-management problems have been going on for years, despite specific warnings, according to the watchdog IG’s office. It says it has designated State’s oversight of grants, contracts and “interagency agreements” (where State spends money on another department’s behalf) as one of the department’s “major management challenges” every year since 2008.

In a special “management alert” issued last month, the IG’s office reports that 61 out of 156 of all the watchdog’s inspections since 2010 of the State Department’s widely varying branches have found “specific grant-management deficiencies,” such as lack of oversight, absent or incomplete documentation, or a lack of proper final closeout for the projects.

The overall implication of the alert is that State’s top managers, especially in the departments charged with administering the bureaucracy, have not been doing anywhere near enough to clean up the longstanding mess. 

The alert cites around 20 critical audits and inspections  in the past two years alone -- not to mention a previous management alert last March on “contract file management deficiencies,” which identified some $6 billion worth of contracts where files were “incomplete or could not be located at all.”

The State Department's top managers have not been doing anywhere near enough to clean up the longstanding mess

State’s outright bestowals of grant money to individuals and organizations, as opposed to its broader aid and development programs, has been growing:  from $1.6 billion in fiscal 2012, to $1.8 billion last year. The number of individual grants, meanwhile, rose from about 14,000 to 16,800 over the same period.

Grant-making has been on the rise in part because the State Department has been moving, often with much fanfare, to rely more on private individuals and non-governmental organizations to carry out a wide variety of social, humanitarian and environmental tasks -- often because of the corruption risks and inefficiencies associated with governments in developing countries.

Spending on such new areas of business as “climate change” has also accelerated, with warnings of attendant widespread oversight problems getting flagged two years ago. 

One of the main reasons for the continuing mess: the number of State Department officers overseeing the cash gusher has been nowhere near up to the task.

Only some 570 grant overseers work at State, with more than 500 of them abroad. In many cases they are under-trained, and in virtually all cases overworked -- the alert cites one overseer who is managing 500 grants -- and they usually perform their oversight part-time while doing other Foreign Service jobs. Turnover among the overseers is high, which, the alert notes, “hampers the development of institutional memory.”

The continuing bureaucratic inaction, after numerous warnings about the lack of proper care for a pile of cash that by definition is bestowed without formal contracts, is the major reason behind the special warning sounded by the department’s aggressive new Inspector General, Steve Linick, who was appointed just more than a year ago.

Management alerts, an innovation under Linick, don’t break new ground but are intended to underline the “serious nature” of the issues involved, and flag the topmost reaches of the State Department about problems.

The current management alert is essentially a lengthy compilation of lapses, poor practices and inattention outlined in previous audits and inspections that have failed to spur managers into changing the situation, at least to the Inspector General’s satisfaction.

This particular alert goes further, by also citing a series of reports from the independent Government Accountability Office, or GAO, which run along similar lines.

In the most recent GAO report, published  in July, the outside watchdog noted  that a numbing array of State Department offices were authorized to hand out grants -- some 27 offices and bureaus, not to mention a wide variety of consulates and embassies.

Much of the cash, however, was spent by fewer than a dozen bureaus and agencies, including the Bureau of Educational and Cultural Affairs ($397 million in 2012), the Bureau of Population, Refugees and Migration ($352.6 million) and an office in the Bureau of Administration ($393 million).

GAO did not investigate all of the spending, but examined a sampling of about $172 million worth of grants and similar hand-outs by State in fiscal 2012. The result was not reassuring.

GAO’s bottom line:  A combination of poor and often missing documentation and “inadequate” analysis of the risks involved in handing out the cash meant that State “cannot be certain that its oversight is adequate or that it is using its limited oversight resources effectively.”