USAID Beefs Up Its Oversight of Nonprofit–and For-Profit–Contractors

Print Share on LinkedIn More

July 2, 2011; Source: Washington Post | The agenda on Capitol Hill and within the Administration regarding nonprofit oversight and accountability issues has hardly been front burner. The days of Congressional inquiries launched by Senator Charles Grassley (R-IA) seem to be in the past. But something important is happening regarding nonprofit accountability in the form of actions being taken by the U.S. Agency for International Development (USAID) in the wake of the suspension and subsequent dissolution of the Academy for Educational Development, one of the largest of the nonprofit contractors receiving and delivering USAID programs.

Last December, USAID suspended AED as a contractor, even though at the time it was receiving some $640 million in USAID contracts. This was no small thing. AED employed 2,500 people around the world, running 300 programs in all 50 U.S. states and 150 countries. A USAID investigation of AED hasn’t been released yet, but the early information on alleged AED administrative or financial improprieties in Pakistan was enough to provoke the suspension, and the suspension led quickly to the end of AED. 

In no short order, AED was on the chopping block, selling off assets and dismissing staff. Most of AED is being acquired by the Durham, N.C.-based Family Health International, expanding FHI’s health portfolio with AED’s educational and economic development programming. Essentially, FHI’s new unit, FHI Development 360, will be the continuation of AED in the marketplace.

Behind the AED shutdown was an October 2009 USAID Inspector General report that eviscerated the agency’s procedures for investigating, suspending, and disbarring contractors. Going after AED, one of the largest foreign aid “implementing partners” with an annual budget of $440 million, was a big step. It suggests a muscular oversight approach to the 3,500 companies and 300 NGOs USAID uses to deliver development aid. 

Last week, USAID announced that it had fined AED between $5 million and $15 million for submitting false claims under two cooperative agreements that paid for some AED work in Afghanistan and Pakistan. The Washington Post says that USAID has suspended or disbarred 39 contractors this year, compared to only 18 last year. 

This is tough regulatory oversight from an administrative agency. Does it mean that the Obama Administration’s take on nonprofit accountability is to focus its efforts through government agencies aiming at nonprofits’ use of federal resources — with seven- and eight-figure fines looming as the consequence of financial improprieties?—Rick Cohen