March 05, 2013
The U.S. Agency for International Development Inspector General (IG) last week released an audit of a program to provide loans to businesses in Haiti (available here). The audit is just the latest report from the IG to find significant problems with USAID’s programs in Haiti, following previous findings regarding cash-for-work programs, shelter provision, food aid and USAID’s largest contractor, Chemonics. The Associated Press’ Trenton Daniel reports that:
An audit of a U.S. Agency for International Department program that aimed to boost Haiti’s economy by providing loans to businesses has found that the program failed to award loans to intended targets, train workers and keep accurate records.
The aim of the audit released in late February by USAID’s Office of the Inspector General was to see whether a USAID loan program was indeed introducing lending practices to overlooked areas and borrowers, particularly in the areas of agriculture, construction, tourism, handicrafts and waste management. Most of the loans were supposed to go toward women, first-time borrowers and small- and medium-sized enterprises.
The loan program provided some $37.5 million in guarantees, of which just over $19 million in guarantees have been extended. According to publicly available data, only about a quarter went to woman-owned businesses, less than 30 percent went to first-time borrowers, and 75 percent were concentrated in the West department, though these numbers likely overstate the reality on the ground. In addition to many other problems, the audit found that “the key monitoring data was outdated, incomplete, or inaccurate,” for example, information on whether the recipient was a first-time borrower was “recorded incorrectly 41 percent of the time.”
The focus of the audit, Daniel reports, was the four largest of the seven guarantees, “worth $31.5 million,” of the $37.5 million total. Of these Daniel notes that two were made after the 2010 earthquake:
They were a Haitian bank named Sogebank, a Haitian development finance institution named Sofihdes that USAID helped create in 1983 and an agriculture-focused outfit named Le Levier Federation.
The audit found that few women and first-time borrowers received loans and lenders didn’t make much effort to work with them.
And while the loans were intended to target “development corridors,” Daniel notes,
Instead they stayed in the Port-au-Prince area.
Ninety percent of Sogebank’s loans were confined to the capital and the bank didn’t give loans to other parts of the country. Some 81 percent of the Sofihdes loans were in Haiti’s capital.
Other problems included that,
The USAID office in Haiti failed to properly train workers who make the loan guarantee coverage decisions. Lenders didn’t always understand or carry out program goals and didn’t always adjust lending practices to meet the goals.
And
The loans weren’t supposed to go to enterprises that appeared on a list of “prohibited businesses” that supported law enforcement activities, surveillance, gambling, tobacco, pharmaceuticals, and alcohol and jewelry. Loans, however, went to some of these businesses because, the audit said, “lenders didn’t have effective practices in place and because USAID didn’t periodically review the loans.”
The loan program sought to expand financial services to underserved areas but most borrowers already had relationships with at least one of the lenders. More than a quarter of the Sofihdes and Sogebank borrowers interviewed by auditors said they could qualify for a loan elsewhere.
Many of the problems found by the IG revolve around the lack of oversight provided by USAID, which allowed the problems detailed above to occur. As we have previously noted, USAID’s increasing reliance on contractors has affected efforts to provide greater oversight, implement procurement reform and improve the efficacy of U.S. aid in Haiti.
As was the case with previous audits conducted by the IG, the report includes a number of recommendations for USAID on how to improve the program. While USAID agreed to all the recommendations, the agency has a record of failing to implement IG recommendations. A report released today by the U.S. House Committee on Oversight and Government Reform notes that USAID has over 1,200 “open and unimplemented” recommendations. The report notes that the USAID IG, “disclosed numerous unimplemented recommendations related to vast overpayments and suggested recoveries of unsupported or ineligible costs,” incurred by contractors.
The lack of implementation is tied to the absence of permanent leadership in the IG offices at USAID and other agencies. The Project on Government Oversight, which tracks IG vacancies, notes that, “a permanent IG has the ability to set a long-term strategic plan for the office, including setting investigative and audit priorities. An acting official, on the other hand, is known by all OIG staff to be temporary, which one former IG has argued “can have a debilitating effect on [an] OIG, particularly over a lengthy period.” Senator Charles Grassley (R-IA) has echoed that sentiment, saying “Even the best acting inspector general lacks the standing to make lasting changes needed to improve his or her office.”
USAID has been without a permanent IG for 507 days.
