Quarterly Progress and Oversight Report on the Civilian Assistance Program in Pakistan, As of June 30, 2010

Executive Summary

U.S. assistance to Pakistan is authorized by the Enhanced Partnership with Pakistan Act of 2009 (Public Law 111-73, 123 Stat. 2060). The act authorizes a total of $7.5 billion for fiscal years (FY) 2010 through 2014 to support programs for democratic, economic, and development assistance. The U.S. Department of State's (DOS) strategy report for providing civilian assistance outlines three key objectives:

- Improve the Government of Pakistan's capacity to address the country's most critical infrastructure needs.

- Help the Pakistani Government address basic needs and provide improved economic opportunities in areas most vulnerable to extremism.

- Strengthen Pakistan's capacity to pursue economic and political reforms that reinforce stability.

For FY 2010, Congress appropriated $1.458 billion. As of June 30, 2010, nearly $2.141 billion in FY 2009 and FY 2010 funds have been obligated to implement the programs identified in the civilian assistance strategy.

These funds support U.S. Government assistance programs and align with the three broad categories identified in the assistance strategy: high-impact, high-visibility infrastructure; focused humanitarian and social services; and government capacity development.

The U.S. Agency for International Development (USAID) reports a significant increase in awards to Pakistani institutions. As of June 30, 2010, 33 awards totaling $875.5 million had been made. To overcome the challenges presented by the limited institutional capacity of some Pakistani institutions, strategies have been developed including preaward audits of local implementing partners, capacity-building assistance, and procedures to ensure accountability for U.S. assistance funds. However, other issues, such as security threats, staffing shortages, and delays in processing visas for U.S. officials, continue to impede the implementation and monitoring of assistance programs.

Oversight entities have also taken steps to ensure that U.S. Government funds are protected against waste and theft. For example, the DOS and USAID Offices of Inspector General (OIGs) have established field offices in Pakistan, and the USAID OIG has provided training to auditors from the Office of the Auditor General; conducted joint investigations with the National Accountability Bureau; provided fraud awareness training; and collaborated with USAID/Pakistan to establish a fraud hotline.

During the period covered by this report, April 1 through June 30, 2010, USAID OIG completed one performance audit, one performance review, and two financial audits. The performance audit, of USAID/Pakistan's Primary Healthcare Revitalization, Integration and Decentralization in Earthquake-Affected Areas Project, focused on improving access to and the quality of primary health care services. The audit found that the project has contributed to improving the quality of primary health care services, but more work remains to be done to improve access to these services. OIG's review of USAID's programs for internally displaced persons (IDPs) in Pakistan found that USAID's methods for monitoring activities in high-threat environments needed improvement, as did controls over payments intended for IDPs. One financial audit-on the management of USAID funds to Forman Christian College for a degree program in basic science and technology-did not identify any significant deficiencies or any instances of noncompliance with applicable laws and regulations, or agreement provisions. The other financial audit, conducted on USAID funds managed by Khushhali Bank to improve access to microfinance services and to strengthen the bank as a microfinance institution, identified $65,652 in questioned costs, as well as $24,282 in cost-sharing contributions by the bank that were also questioned. In addition to these audit activities, USAID OIG closed five investigative cases. One case resulted in the termination of the employment of a USAID personal services contractor who had used his position to obtain employment for relatives with a USAID-funded partner.

During the same period, the U.S. Government Accountability Office (GAO) issued one performance audit that covered the planning and documentation of U.S. development assistance in the Federally Administered Tribal Areas (FATA). GAO found that planning and documentation of U.S. development assistance programs need to be improved. U.S. development objectives in FATA are generally aligned with U.S. national security goals and Pakistan's FATA development plans, but joint plans by USAID and Pakistan had not yet been completed. Also, some key elements and documentation for programs were missing or not collected in performance management plans and reports. Further, GAO found that USAID could not apply the direct monitoring procedures for development assistance called for in its guidance, because of security challenges, and did not always document its use of indirect monitoring procedures. GAO made several recommendations to DOS and USAID and noted the importance of enhancing oversight in light of the $7.5 billion in assistance for Pakistan authorized by the act.