FBI Employee Pleads Guilty to Acting in the United States as an Agent of the Chinese Government

Posted: 12:15 am ET

 

Via DOJ | Defendant Collected and Caused Sensitive FBI Information to be Provided to the Chinese Government

Kun Shan Chun, a native of the People’s Republic of China and a naturalized U.S. citizen, pleaded guilty today to a criminal information charging him with acting in the United States as an agent of China without providing prior notice to the Attorney General.

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge Diego P. Rodriguez of the FBI’s New York Field Office made the announcement.

Chun, aka Joey Chun, 46, pleaded guilty before U.S. Magistrate Judge James C. Francis IV of the Southern District of New York.  He was an employee of the FBI until his arrest on March 16, 2016.

“Kun Shan Chun violated our nation’s trust by exploiting his official U.S. Government position to provide restricted and sensitive FBI information to the Chinese Government,” said Assistant Attorney General Carlin.  “Holding accountable those who work as illegal foreign agents to the detriment of the United States is among the highest priorities of the National Security Division.”

“Americans who act as unauthorized foreign agents commit a federal offense that betrays our nation and threatens our security,” said U.S. Attorney Bharara.  “And when the perpetrator is an FBI employee, like Kun Shan Chun, the threat is all the more serious and the betrayal all the more duplicitous.  Thanks to the excellent investigative work of the FBI’s Counterintelligence Division, the FBI succeeded in identifying and rooting out this criminal misconduct from within its own ranks.”

“No one is above the law, to include employees of the FBI,” said Assistant Director in Charge Rodriguez.  “We understand as an agency we are trusted by the public to protect our nation’s most sensitive information, and we have to do everything in our power to uphold that trust.”

According to the complaint, the information and statements made during today’s court proceeding:

In approximately 1997, Chun began working at the FBI’s New York Field Office as an electronics technician assigned to the Computerized Central Monitoring Facility of the FBI’s Technical Branch.  In approximately 1998, and in connection with his employment, the FBI granted Chun a Top Secret security clearance and his duties included accessing sensitive, and in some instances classified, information.  In connection with a progressive recruitment process, Chun received and responded to taskings from Chinese nationals and at least one Chinese government official (Chinese Official-1), some, if not all, of whom were aware that Chun worked at the FBI.  On multiple occasions prior to his arrest in March 2016, at the direction of Chinese government officials, Chun collected sensitive FBI information and caused it to be transmitted to Chinese Official-1 and others, while at the same time engaging in a prolonged and concerted effort to conceal from the FBI his illicit relationships with these individuals.

Beginning in 2006, Chun and some of his relatives maintained relationships with Chinese nationals purporting to be affiliated with a company in China named Zhuhai Kolion Technology Company Ltd. (Kolion).  Chun maintained an indirect financial interest in Kolion, including through a previous investment by one of his parents.  In connection with these relationships, Chinese nationals asked Chun to perform research and consulting tasks in the United States, purportedly for the benefit of Kolion, in exchange for financial benefits, including partial compensation for international trips.

Between 2006 and 2010, Chun’s communications and other evidence reflect inquiries from purported employees of Kolion to Chun while he was in the United States, as well as efforts by the defendant to collect, among other things, information regarding solid-state hard drives.

In approximately 2011, during a trip to Italy and France partially paid for by the Chinese nationals, Chun was introduced to Chinese Official-1, who indicated that he worked for the Chinese government and that he knew Chun worked for the FBI.  During subsequent private meetings conducted abroad between the two, Chinese Official-1 asked questions regarding sensitive, non-public FBI information.  During those meetings, Chun disclosed, among other things, the identity and potential travel patterns of an FBI Special Agent.

In approximately 2012, the FBI conducted a routine investigation relating to Chun’s Top Secret security clearance.  In an effort to conceal his relationships with Chinese Official-1 and the other Chinese nationals purporting to be affiliated with Kolion, Chun made a series of false statements on a standardized FBI form related to the investigation.  Between 2000 and March 16, 2016, Chun was required by FBI policy to disclose anticipated and actual contact with foreign nationals during his international travel, but he lied on numerous pre- and post-trip FBI debriefing forms by omitting his contacts with Chinese Official-1, other Chinese nationals and Kolion.

On multiple occasions, Chinese Official-1 asked Chun for information regarding the FBI’s internal structure.  In approximately March 2013, Chun downloaded an FBI organizational chart from his FBI computer in Manhattan.  Chun later admitted to the FBI that, after editing the chart to remove the names of FBI personnel, he saved the document on a piece of digital media and caused it to be transported to Chinese Official-1 in China.

Chinese Official-1 also asked Chun for information regarding technology used by the FBI.  In approximately January 2015, Chun took photos of documents displayed in a restricted area of the FBI’s New York Field Office, which summarized sensitive details regarding multiple surveillance technologies used by the FBI.  Chun sent the photographs to his personal cell phone and later admitted to the FBI that he caused the photographs to be transported to Chinese Official-1 in China.

In approximately February 2015, the FBI caused an undercover employee (UCE) to be introduced to Chun.  The UCE purported to be a U.S. citizen who was born in China and working as a consultant to several firms, including an independent contractor for the Department of Defense, among other entities.

During a recorded meeting in March 2015, Chun told the UCE about his relationship with Kolion and Chinese nationals and later explained to the UCE that Kolion had “government backing,” and that approximately five years prior a relative met a “section chief” whom Chun believed was associated with the Chinese government.

In another recorded meeting in June 2015, Chun told the UCE that he had informed his Chinese associates that the UCE was a consultant who might be in a position to assist them.  Chun said that he wished to act as a “sub-consultant” to the UCE and wanted the UCE to “pay” him “a little bit.”   In July 2015, after coordinating travel to meet Chun’s Chinese associates, Chun met with the UCE in Hungary twice.  During one of the meetings, Chun stated that he knew “firsthand” that the Chinese government was actively recruiting individuals who could provide assistance and that the Chinese government was willing to provide immigration benefits and other compensation in exchange for such assistance.  The UCE told Chun that he had access to sensitive information from the U.S. government.  Chun responded that his Chinese associates would be interested in that type of information and that Chun expected a “cut” of any payment that the UCE received for providing information to the Chinese government.

The count of acting in the United States as an agent of China without providing notice to the Attorney General carries a maximum sentence of 10 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

The FBI’s Counterintelligence Division investigated the case.  The prosecution is being handled by Assistant U.S. Attorneys Emil J. Bove III and Andrea L. Surratt of the Southern District of New York’s Terrorism and International Narcotics Unit, with assistance provided by Trial Attorneys Thea D. R. Kendler and David C. Recker of the National Security Division’s Counterintelligence and Export Control Section.

Related files:

Fraudsters in Costa Rica VOIP Scheme Plead Guilty to $9 million “Sweepstakes Fraud”

Posted: 1:29 am ET

 

Via USDOJ: Owner of Costa Rican Call Center and Two Others Plead Guilty to Defrauding Elderly through Offshore Sweepstakes Scheme

Two U.S. citizens and a Canadian citizen have pleaded guilty for their roles in a $9 million “sweepstakes fraud” scheme to defraud hundreds of U.S. residents, many of them elderly, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina.

Jeffrey Robert Bonner, 37, of Sacramento, California; Cody Trevor Burgsteiner, 33, of Houston; and Darra Lee Shephard, 57, of Calgary, Alberta, pleaded guilty this week before U.S. Magistrate Judge David Keesler of the Western District of North Carolina to various counts of conspiracy to commit wire fraud and mail fraud, wire fraud, conspiracy to commit money laundering and international money laundering, all in connection with a Costa Rican telemarketing fraud scheme.  Sentencing dates have not been set.

As part of their guilty pleas, Bonner, Burgsteiner and Shephard each admitted that from approximately 2007 through November 2012, they worked in a call center located in Costa Rica, which Bonner owned, where they placed telephone calls to U.S. residents, falsely informing them that they had won a substantial cash prize in a “sweepstakes.”  The victims, many of whom were elderly, were told that in order to receive the prize, they had to pay for a purported “refundable insurance fee,” the defendants admitted.  Bonner, Burgsteiner and Shephard admitted that once they received the money, they contacted the victims again to tell them that their prize amount had increased, due to either a clerical error or because other winners had been disqualified.  The victims were then told to send additional money to pay for new purported fees, duties and insurance to receive the now larger sweepstakes prize, the defendants admitted.  The defendants further admitted that they and their co-conspirators continued their attempts to collect additional money from the victims until an individual either ran out of money or discovered the fraudulent nature of the scheme.  To mask that they were calling from Costa Rica, the conspirators utilized voice over internet protocol (VoIP) phones that displayed a 202 area code, giving the false impression that they were calling from Washington, D.C., they admitted.  According to admissions made in connections with their pleas, the defendants and their co-conspirators often falsely claimed that they were calling on behalf of a U.S. federal agency to lure victims into a false sense of security.

Bonner, Burgsteiner, Shephard and their co-conspirators were responsible for causing approximately $9 million in losses to hundreds of U.S. citizens.

The U.S. Postal Inspection Service, FBI, Internal Revenue Service-Criminal Investigation, Federal Trade Commission and Department of Homeland Security investigated the case, and the Criminal Division’s Fraud Section supervised the investigation.  Senior Litigation Counsel Patrick Donley and Trial Attorneys William Bowne and Gustav Eyler of the Fraud Section are prosecuting the case.

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McDonnell v. United States: OGE Issues Advisory on Supreme Court Decision to Ethics Officials

Posted: 12:09 am ET

Last month, the Office of Government Ethics (OGE) issued a legal advisory related to the SCOTUS ruling on bribery charges against former Virginia Governor Robert F. McDonnell.  To recap, the former governor, and his wife, Maureen McDonnell, were indicted by the Federal Government on “honest services fraud and Hobbs Act extortion charges related to their acceptance of $175,000 in loans, gifts, and other benefits from Virginia businessman Jonnie Williams, while Governor McDonnell was in office. Williams was the chief executive officer of Star Scientific, a Virginia-based company that had developed Anatabloc, a nutritional supplement made from anatabine, a compound found in tobacco. Star Scientific hoped that Virginia’s public universities would perform research studies on anatabine, and Williams wanted Governor McDonnell’s assistance in obtaining those studies.”  According to court filings, to convict the McDonnells, the Government was required to show that Governor McDonnell committed (or agreed to commit) an “official act” in exchange for the loans and gifts.  The case was argued in the Supreme Court in April 2016, and SCOTUS decided on the case in June 2016 (see SCOTUS case here in PDF).

Excerpt from the OGE memo:

On June 27, 2016, the U.S. Supreme Court issued its opinion in McDonnell v. United States, 579 U.S. ___, 195 L. Ed. 2d 639 (2016), which vacated the lower courts’ conviction of former Virginia Governor Robert F. McDonnell on bribery charges. The U.S. Office of Government Ethics (OGE) is issuing this legal advisory to emphasize that the Supreme Court’s holding in McDonnell does not affect other applicable prohibitions on Federal employees’ solicitation or acceptance of gifts, including 5 U.S.C. § 7353 and 5 C.F.R. § 2635.202(a).

The advisory notes the following:

5 U.S.C. § 7353 prohibits an executive branch employee from soliciting and accepting gifts from any prohibited source, unless an exception promulgated by regulation applies. Likewise, the Standards of Ethical Conduct for Employees of the Executive Branch, at 5 C.F.R. § 2635.202(a), prohibit an employee from soliciting or accepting any gift, directly or indirectly, if the gift is given because of the employee’s official position or the person offering the gift is a prohibited source. There is no requirement for the gift to be made in connection with any “official act” for these prohibitions to apply. These prohibitions apply to anything having monetary value unless the item is excluded from the definition of “gift” under 5 C.F.R § 2635.203(b) or qualifies for one of the narrowly tailored exceptions set forth in 5 C.F.R. § 2635.204.

OGE also says that “The Court’s opinion did not address the application of 5 U.S.C. § 7353, 5 C.F.R.§ 2635.202, or any other ethics law; rather, the Court opined solely on the construction of 18 U.S.C. § 201(a)(3). Consequently, the McDonnell opinion also does not affect OGE’s legal interpretation of the criminal conflict of interest statutes at 18 U.S.C. §§ 202-209 or OGE’s interpretation of the gift prohibitions at 5 U.S.C. § 7353 or 5 C.F.R. § 2635.202(a).”

Read the full advisory below:

Related items:

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Ambassadorship Pitch: Possible Countries — Anywhere in Europe Is A-OK

Posted: 4:14 am ET

 

It’s that time of year.  Related to a previous post, Self-Service: Debating the Merits of the Different Ambassadorships, here is an email pitching for an ambassadorship in 2012 for just about anywhere in Europe. The short bio includes places visited for work or pleasure.

  • Spain [REDACTED] New York), extensive travel throughout Spain for professional and personal trips. As a global financial expert, could be very helpful with Spain’s current economic crisis.
  • Belgium — worked on the current EU debt crisis as a global banker.
  • Netherlands —[REDACTED] Numerous visits to Amsterdam for work over the years.
  • Switzerland -[REDACTED] — numerous trips to Zurich and Geneva for work.
  • REDACTED, over 20 trips to Buenos Aires, extensive personal travel throughout the country. Fluent in Spanish.
  • Other European countries — Denmark, Sweden, Portugal, Ireland, Switzerland, Norway, Luxembourg.

Heather Samuleson’s email to Abedin-Mills in December 2012 includes the following:

He noted his “package” is currently with Valarie, Jim Messina and Alyssa and was told by them that S’s recommendation would be a “gamechanger.”  Informed him we are just registering interest and sharing with the WH at this time as it is ultimately a WH decision …

 

A related note — while former ambassadors do not carry diplomatic passports for life  [*exception: courtesy diplomatic passports are a subtype of diplomatic passports and are issued to former Presidents, Vice Presidents, Secretaries of State, Deputy Secretaries of State, and retired career Senior Foreign Service Officers who attained the personal rank of Career Ambassador, and their spouses and widows/widowers], we’ve always thought that they get to carry their rank for life.  We were recently nudged to revisit the use of the honorific title of Ambassador by former ambassadors.  So we had to revisit the Foreign Affairs Handbook which says:

3 FAH-1 H-2439
(CT:POH-163; 08-18-2014)

b. An individual who has served as an Ambassador, appointed by the President, by and with the advice and consent of the Senate, may use the title of ambassador, as appropriate, upon retirement:

U.S. Ambassador, Retired; or

Ambassador-at-Large of the United States, Retired.

One might argue with the phrase “upon retirement” for noncareer appointees but the Transition Center of the Foreign Service Institute has a special note on how to address ambassadors (PDF):

Over the years, and recently as well, there has been discussion about the use of the honorific title of Ambassador by former ambassadors, both those who remain active in the Foreign Service and those who are retired. For years, Department regulations have forbidden this usage unless actually in the job of ambassador or for those few who retired with the personal rank of career Ambassador.

For current employees, long-standing custom and practice, however, has established a clear tradition in the Department and in the Foreign Service that persons who have served as ambassador after Senate confirmation may continue to use the title after such service in appropriate communications with others, may be referred to in communications and conversations by the title of Ambassador, and may be introduced to public audiences by the title.

The Department has also clarified the use of the title for persons who have retired from the Foreign Service or left government service who served as ambassador after Senate confirmation. An amendment to the various regulations permits the use of the title, “Ambassador, Retired,” for all such persons.

Unless the Protocol for the Modern Diplomat has been updated to say otherwise, it looks like the use of the honorific title of Ambassador by former ambassadors is permissible.

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Self-Service: Debating the Merits of the Different Ambassadorships

Posted: 3:25 am ET

Via NYT:

At first-come-first-served seats near the bar, assistants huddled around lengthy spreadsheets, figuring out which donors were entitled to which passes to which events. Outside, a protester walked with a sign denouncing big money. Inside, two stocky men could be heard debating the merits of the different ambassadorships they hoped to earn under Mrs. Clinton. Even a low-ranking posting meant having “ambassador” on a child’s wedding invitation, the two agreed, and would be helpful in wrangling invitations to sit on corporate boards.

Wow! That’s real public service. We hope they can find those low-ranking posts on the map!

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Snapshot: Top Recipients of U.S. Assistance — FY1995, FY2005, FY2015

Posted: 1:35 am ET

Via CRS:

In FY2015, the United States provided some form of bilateral foreign assistance to about 144 countries. The following identifies the top 15 recipients of U.S. foreign assistance for FY1995, FY2005 and FY2015. Assistance, although provided to many nations, is concentrated heavily in certain countries, reflecting the priorities and interests of United States foreign policy at the time (via – PDF)

Screen Shot

 

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Did USAID/OIG Retaliates Against an Auditor Alleging $120 Million Waste?

Posted: 12:18  am ET

 

The Foreign Service Grievance Board (FSGB) wants to know.

In December, it granted the unnamed auditor’s (the charged employee) Motion for Additional Discovery. USAID/OIG was ordered to produce the investigation files of both Mr. REDACTED and Ms. Lisa Mcclendon, the Deputy Assistant IG for Investigations at USAID OIG. Below is a quick summary of this case extracted from the publicly available records of the FSGB:

REDACTED, was employed by the United States Agency for International Development in the Office of the Inspector General (USAID OIG, agency) as a financial auditor in REDACTED from 2009 to 2011. During that time, she was assigned, inter alia, to audit two USAID programs (a REDACTED HIV/AIDs program in 2010 and a REDACTED Family Planning/Contraceptives program in 2011). The charged employee stated that she was prepared to make negative findings about both programs, alleging a waste of $120 million and $100 thousand dollars in each program, respectively. The OIG responded that the employee’s audit manager,REDACTED, and the Regional Inspector General, REDACTED, overruled her negative findings on grounds that they were erroneous and/or did not need to be included in the audit reports.

On June 9, 2011, an anonymous or confidential complaint was delivered to the REDACTED USAID OIG office, stating that the charged employee was submitting partially false vouchers for two-way education transportation reimbursement, because her husband was driving the children to school in the mornings. REDACTED, an investigator in REDACTED received the complaint and after consulting with an Assistant Special Agent in Charge in Washington, D.C., REDACTED, arranged for a Regional Security Officer (RSO) to follow Mr. REDACTED in the mornings to confirm that he was driving the children to school. The investigator also requested copies of the education transportation vouchers that showed that Ms. REDACTED had requested reimbursement for the cost of transporting the children to and from school.

Several weeks later, Lisa McClennon, the Deputy Assistant IG for Investigations, traveled to REDACTED allegedly for a routine site visit. When she arrived and reviewed the pending investigations, she testified that she concluded that REDACTED investigation “had not progressed.”2 She took over the investigation, interviewed more than a dozen witnesses and requested a large number of financial documents that Ms. REDACTED had submitted for reimbursement. Ms. McClennon stated that when she reviewed the documents and interviewed the witnesses, she concluded that the employee had submitted a number of false vouchers for reimbursement of educational travel expenses, a number of requests for cost of living allowance (COLA) payments to which she was allegedly not entitled, and a request for larger housing to which she was also allegedly not entitled.

(Note: WHOA! — requesting larger housing is against the rules? Isn’t that for the Housing Board to decide on entitlement? Active link and emphasis added above).

Ms. McClennon reported her findings to Mr. Carroll in Washington. He ordered Ms. REDACTED immediate curtailment, despite the fact that at that time she was away from post with her family. In addition, Mr. Carroll proposed to separate Ms. REDACTED from the Service for cause. After reviewing written and oral replies from the charged employee, Mr. Carroll recommended in a letter, dated August 3, 2012, that the employee be separated for cause.3  Ms. REDACTED responded to the recommendation by arguing that the investigation and the resultant charges were retaliatory based on her status as a whistleblower when she attempted to report negative findings in the REDACTED and REDACTED audits.
[…]
Before the Board was able to issue a final order,5 however, the employee filed a motion on November 14, 2014, advising the Board that Mr. Carroll had withdrawn his name from consideration for the position of IG and the President had formally withdrawn his name from consideration by Congress on November 12, 2014.6 The motion sought leave to file a supplemental pleading and to reopen discovery based on newspaper articles that reported that  Mr. Carroll was accused by OIG auditors (not including Ms. REDACTED of putting pressure on them to modify audit reports in order to delete negative findings about USAID. In addition, the charged employee requested the opportunity to depose Mssrs.REDACTED  and REDACTED.

The footnotes:

  • The Board initially came to the conclusion that Mr. Carroll did not have authority to prosecute this matter because his term as Acting IG expired before he recommended Ms. REDACTED for separation. The case was then dismissed. However, in 2013, Mr. Carroll was nominated to be the IG for USAID. Thus, he again became the Acting IG, pursuant to the Federal Vacancy Reform Act (FVRA) of 1998, 5 U.S.C. § 3345 et seq. As Acting IG, Mr. Carroll ratified his earlier recommendation to separate Ms. REDACTED for cause and the grievance appeal was reinstated.

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Interagency People to SIGAR: Hit the road John and don’t you come back no more, no more, no more …

Posted: 2:26 am PT

 

Last year, the NYT covered SIGAR’s John Sopko.

This past Labor Day, there was this big splash, quite an effort here from a dozen or so folks from three agencies:

Detractors describe Sopko as “egomaniacal,” “petty,” “a bully” and “the Donald Trump of inspectors general.” But Sopko has publicly brushed off — even relished — the criticism, arguing that it’s his job to shine a light on mistakes made by “bureaucrats” who would prefer that his reports “be slipped in a sealed envelope in the dead of night under the door — never to see the light of day.”

“My job is to call balls and strikes,” Sopko once told NBC News. “Nobody likes the ump.”

Here’s SIGAR Sopko previously discussing his media strategy:

Then here’s one view from Afghanistan:

John F. Sopko was appointed Special Inspector General for Afghanistan Reconstruction on July 2, 2012 by President Obama. In his last congressional post, Mr. Sopko was Chief Counsel for Oversight and Investigations for the House Committee on Energy and Commerce, chaired by Rep. John D. Dingell (D-Mich.), during the 110th Congress.

In the fall of 2010, a bi-partisan group of senators and POGO called for the removal of Mr. Sopko’s predecessor. At that time, POGO reported that “the SIGAR office has largely been considered a disappointment, and numerous deficiencies in its operations and audit reports have been identified.” The POGO investigator also said at that time that the “office has produced milk-toast audits that have not inspired congressional confidence.”  In January 2011, the previous inspector, Arnold Fields, a retired Marine major general, resigned, per WaPo “after a review by the Council of Inspectors General found that many of his office’s audits barely met minimum quality standards and that Fields had not laid out a clear strategic vision.”

In accordance with Government Auditing Standards, SIGAR is required to undergo a periodic external quality control review (peer review). SIGAR’s latest peer review, which was conducted by the Council of Inspectors General on Integrity and Efficiency (CIGIE) was publicly released on March 30, 2016:

The NASA Office of Inspector General reviewed the system of quality control for the Special Inspector General for Afghanistan Reconstruction (SIGAR) Auditing Division in effect for fiscal year 2015. As indicated in our February 25, 2016, report, we assigned SIGAR a “pass” rating. During our review, we found three issues that were not of sufficient significance to affect our opinion on this rating but that require your attention. We believe these issues could be addressed through simple revisions to the policy manual.

So SIGAR was reviewed by IG peers and got a pass rating!  Imagine that.

Mr. Sopko’s deputy famously said once,“Some people are unhappy with the fact we get press coverage, even though our two-person press shop pales in comparison to the squadrons of PR people at Embassy Kabul, ISAF, or DOD. Some people think we’re doing this to attract attention and gratify our egos. They are mistaken. Neither John nor I are angling for another government job, movie role, book advance, or trying to become the next YouTube sensation.”

We should note that when we request information from SIGAR, we always get a response. When we request information from US Embassy Kabul, our emails just get swallowed by black holes of indifference.

 

Related item:

Letter of Comment on the System of Quality Control for the Audit Organization of the Special Inspector General for Afghanistan Reconstruction (PDF) March 2016

 

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USAID/OIG Highlights Challenges to the Management and Administration of Foreign Assistance

Posted: 3:24 am ET

 

On March 15, the new USAID Inspector General Ann Calvaresi Barr went before the Subcommittee of the Senate Committee on Appropriations during its review of the FY2017 budget request and funding justification hearing for USAID. She told the subcommittee that in FY2016, OIG issued 698 financial and performance audits and reviews with more than 1,268 recommendations for improving foreign assistance programs.

These audits identified approximately $290 million in questioned costs and funds to be put to better use. OIG’s investigative work led to 10 arrests and 91 administrative actions such as suspensions, debarments, and terminations of employment. OIG also realized nearly $85 million in savings and recoveries in FY 2015 as a result of its investigations. In addition, OIG provided 270 fraud awareness briefings and training sessions for close to 8,600 attendees in 36 countries.

She talked about changes in the USAID OIG operations:

On the horizon are changes to improve OIG’s work to ensure it has a meaningful impact on the strategy, policy, and practice of U.S. foreign assistance. This includes building and maintaining a workforce equipped with the right guidance, skills, and resources to evaluate complex development programs, unravel sophisticated fraud schemes, and address new oversight requirements.
[….]
In addition to recruiting and developing top-notch staff, I am committed to making certain that OIG has the right internal policies, processes, and systems in place to meet the highest standards for reliable and meaningful oversight. The quality of our audit and investigative work must be beyond question.

Most importantly, she highlighted to Congress the many challenges to the management and administration of U.S. foreign assistance:

Work in nonpermissive environment:

Work in nonpermissive environments is a leading challenge for foreign assistance agencies. Programs in conflict-affected settings face greater risks than those operating in more stable environments. These risks typically include a more acute threat to the lives of U.S. Government and implementer personnel. In these settings, in addition to limited access to projects and threats to safety, USAID often confronts dishonest and opportunistic actors who look to prey upon the influx of foreign aid. In some cases, instability and weak institutions threaten both the immediate progress and long-term benefit of development efforts. Agency staff and implementing partners alike face severe constraints in monitoring the progress of development and humanitarian assistance activities in these settings. Shortfalls in these activities can lead to health and environmental hazards, such as those we observed in a camp for displaced persons in Iraq. They can also create conditions for pervasive fraud and diversion. OIG, for example, recently documented the large-scale substitution of basic hygiene and food items intended for displaced Syrians with substandard materials. In other cases, we have noted the diversion of humanitarian goods to terrorist groups, and uncovered a case in which a sub-implementer received funds for a range of humanitarian assistance activities that it never performed. Meanwhile, in Afghanistan we found that a lack of access to project sites constrained USAID’s ability to observe 74 percent of the projects it funded.

Unreliable data: collection, reporting and use

[T]he collection, use, and reporting of unreliable data in connection with development programs. OIG has identified poor data quality as a concern across a spectrum of USAID’s programs, irrespective of geographic location or functional area. Of 196 performance audit and survey reports OIG published from FY 2013 to FY 2015, about 4 in 10 identified problems with data quality or sufficiency. OIG has repeatedly identified errors and overstatements, gaps in data collection and reporting, and problems in the consistency with which underlying calculations are made. Recent OIG work on USAID’s Ebola response activities, for example, found that the Office of Foreign Disaster Assistance lacked adequate performance measures given the nature of the Ebola crisis. OIG identifies data quality problems in more traditional development programs as well, as indicated in recent reports on justice system reform efforts, activities under the Feed the Future Initiative, and education programs. Without reliable data that meaningfully speaks to program results, USAID cannot effectively manage its programs or plan new ones. Moreover, absent reliable information on program progress, policymakers are unable to make fully informed decisions on the course of U.S. foreign assistance.

Sustainability:

USAID’s long-term goal is to transfer ownership of its development initiatives so that the progress and results from its projects continue. To achieve this end, USAID is responsible for building sustainability into its plans and activities. Notwithstanding this aim, sustainability remains a major management challenge and OIG has often found that USAID planning for the end of projects has been inadequate. About a quarter of performance audit reports OIG issued from FY 2013 through FY 2015 contained recommendations to do more to ensure sustainability. In one case, we noted an HIV/AIDS project lacked a formal transition plan 3 years after the project began, threatening its continuation. In other cases, OIG has found that a lack of host country support, including the limited capacity of some USAID partners, reduced the likelihood that development goals could be realized and sustained. Recent OIG reports on programs in Afghanistan and Armenia, for example, noted that local partners lacked the ability to effectively support or continue USAID programs.

The capacity of host country governments and local implementers can indeed determine the success or failure of development efforts. In recognition of the need for technical capacity within host country systems, USAID’s Local Solutions Initiative aims to provide direct funding to host governments and to local private and nonprofit entities. Yet, USAID’s risk mitigation efforts in association with this initiative have not been consistent and this constitutes another significant management challenge for the agency as a result. OIG audit and investigative work over the years has provided evidence that agency and partner controls are unable to effectively safeguard funds in many of these cases. The U.S. Government has channeled a sizable share of assistance to Afghanistan and Pakistan through local systems, for example, but not always demonstrated sufficient accountability for these funds. In FY 2015, we issued a report on USAID’s controls over direct assistance in Afghanistan, identifying shortcomings in both its oversight and in how it communicated about employees’ responsibilities and the expectations placed upon Afghan implementers. In Pakistan, a direct assistance program to support municipal services in Khyber Pakhtunkhwa (KP) fell short in part because the mission failed to effectively work with the grantee, KP’s Planning and Development Department, which lacked adequate capacity to implement the program on its own.

Human resources management, decentralized IT and information security:

Two additional challenges facing USAID pertain to the management of its human resources and decentralized management of information technology (IT) and information security. Audit work last year continued to indicate that USAID faces a shortage of experienced, highly skilled personnel familiar with USAID guidelines, standards, and processes. Staff retained under the Development Leadership Initiative pointed to irrelevant training, poor support in preparation for overseas assignments, and being assigned roles that were less than those of other employees as problems facing a major hiring effort in recent years. We also found that staffing shortages have hampered program implementation and oversight in many locations where USAID operates.

On the IT front, OIG has noted the lack of an effective risk management program as well as a substantial number of open recommendations from prior IT-related audits. OIG deems this to indicate a significant deficiency in the security of USAID-wide information systems, including financial systems. An audit relating to the agency’s privacy program for information technology identified new weaknesses and risks related to potential noncompliance with major privacy laws, including the Privacy Act of 1974, as amended.

The full testimony is here (PDF).

 

Related posts:

 

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USA Pavilion at World Expo Milan 2015 and $26 Million of Unpaid Invoices

Posted: 3:17 am EDT

 

Via Politico:

The huge shortfalls in funding for last year’s World Expo exhibit, which drew 6 million people, now loom as a big embarrassment for the State Department and its leader. Officials will hold a conference call on Thursday to try to appease dozens of creditors.
[….]
Kerry commissioned the agreement in 2013 with a one-off nonprofit, Friends of U.S. Pavilion, to design, build, operate and pay for the U.S. display in Milan. The group was created with the understanding that the State Department would do the heavy lifting on fundraising. That’s what former Secretary of State Hillary Clinton had done for the 2010 Shanghai World Expo, making personal pitches to CEOs to collect more than $60 million in just nine months.

But many people familiar with the fundraising effort note that Clinton’s enormous range of contacts, plus her still-simmering presidential ambitions, had donors lining up quickly in response to calls from her and the cadre of longtime aides she enlisted to help raise the money.

Kerry, by contrast, wasn’t viewed as having a political future, and was scrambling to work out a cease-fire between Ukraine and Russian-backed separatists in Crimea.
[…]
There was also a third factor that helped Clinton succeed where Kerry fell short. Even among those who bitterly dispute whether Kerry should have done more, people both inside and outside government who tried to secure Milan funding privately agree that her celebrity and presidential ambitions made Shanghai a comparatively attractive investment.

Secretary Kerry with John Phillips, Ambassador to the US Mission in Italy, and Ambassador Philip Reeker, US Consul General in Milan, honored the Pavilion with their presence on several occasions, hosted by the US Commissioner General, Ambassador Doug Hickey.

Secretary Kerry with John Phillips, Ambassador to the US Mission in Italy, and Ambassador Philip Reeker, US Consul General in Milan, honored the Pavilion with their presence on several occasions, hosted by the US Commissioner General, Ambassador Doug Hickey. (Photo by USCG Milan)

 

 

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