In a study of implementing partners of U.S. Agency for International Development (USAID) and State Department humanitarian assistance projects in four high-risk countries—Syria, Somalia, Haiti and Kenya—the U.S. Government Accountability Office (GAO) found that most experienced banking access challenges, including denials and delays of fund transfers, problems opening accounts, increased fees and an account closure. Read more

The report, Humanitarian Assistance: USAID Should Improve Information Collection and Communication to Help Mitigate Implementers’ Banking Challenges, which builds upon and echoes findings from Charity & Security Network’s 2017 study on financial access for nonprofit organizations (NPOs), recommends that USAID collect information on banking challenges experienced by its partners and communicate that information to other government agencies as well as outside entities.

Among GAO’s sample of 18 implementing partners were organizations that operate in more than 100 countries, as well as those active in fewer than 20 countries. These organizations’ 2016 annual revenues ranged from $5.9 billion to more than $10 million. Additional interviews were conducted with NPOs outside of this sample to obtain their views on banking access challenges in the context of providing humanitarian assistance. The GAO report builds on echoes findings from Charity & Security Network’s 2017 report, Financial Access for U.S. Nonprofits, which found that 2/3 of all U.S. nonprofits face some type of financial access challenge.

Numerous Challenges Encountered

Within the sample of 18 projects, seven partners encountered banking access challenges, and some of these challenges adversely affected the projects, including one that faced “repeated delays.” All of the difficulties reported were with projects in Somalia or Syria. In addition, 15 of the partners experienced banking access challenges in their global portfolio of projects over the time period examined. This included two partners that “had to reduce the scope of implementation or suspend their projects.” Others told GAO that these challenges posed risks to implementation.

The most frequently cited problem were denials of fund transfers, followed by fund transfer delays. These delays often lasted weeks or months. Most partners claimed that these delays were caused by intermediary, or correspondent banks. Additional challenges included problems opening new bank accounts, increased cost to transfer funds, and a bank account closure.

One partner told GAO that for one project, “in part because of banking access challenges, implementation of the project was delayed and required approval for two no-cost extensions from USAID,” the report explained. The partner also told GAO that it had experienced recurring issues with funds transfers to Syria, including delays of three to six weeks, as well as frequent denials of transfers.

Many implementing partners told GAO that they had found ways to mitigate these banking problems so that they did not adversely impact programs. These included maintaining enough operating funds on hand to buffer against fund transfer delays; using alternate methods to move money, including carrying cash; and maintaining multiple bank accounts.

Where banking challenges did pose risks to programming, these risks were serious, including the potential for physical violence if vendors or staff were not paid on time, potential insolvency of vendors, and possible program suspension.

The GAO report used data from Charity & Security Network’s 2017 report to compare the percentage of NPOs overall having various banking challenges compared to NPOs receiving U.S. government funding that experienced the same challenges. NPOs receiving government funding experienced account closures and refusals to open accounts, as well as unusual requests for documentation, at a higher rate than for NPOs overall. At the same time, the NPOs receiving U.S. government funding experienced fee increases and delays of fund transfers at slightly lower rates than for NPOs generally.

USAID is Unaware of Partners’ Banking Problems

USAID generally does not require partners to report on banking access challenges or the potential risks posed by these challenges to the government-funded projects unless they affect implementation. In a review of approximately 1,300 USAID partner reports, GAO found that in the few instances where these challenges were mentioned, they “lacked sufficient detail for GAO to determine their type, severity or origin,” the report states, adding, “Without information on banking access challenges that pose potential risks to project implementation, USAID is not aware of the full extent of risks to achieving its objectives.”

GAO’s review of more than 1,300 publicly available USAID partner reports for fiscal years 2016 and 2017 from high-risk countries found “no explicit discussion of banking access challenges,” the report states. It continues, “Overall, we identified 5 reports out of the over 1,300 that included some mention of challenges related to banking access. However, those reports lacked sufficient detail for us to determine the type, severity, or origin of the challenges.”

The report notes that “an NPO advocacy group and a large international NPO told us that NPOs may be reluctant to discuss or report banking access challenges publicly because of concern about being perceived as high-risk or unable to carry out their mission, and that any public mention of banking access challenges could adversely affect their ability to raise funds.” Less formal communication from partners regarding their banking challenges is not conveyed beyond staff USAID staff directly overseeing the project, the report explains. It goes on to state, however, that without this information, USAID “may not be aware of the full extent of risks to achieving its humanitarian assistance objectives.” In addition, USAID is unable to “assist other partners that might be experiencing similar issues based on lessons learned from previous experiences.”

Therefore, GAO recommends that USAID undertake the following:

  • Take steps to collect information on banking access challenges experienced by USAID’s implementing partners.
  • Take steps to communicate information on banking access challenges faced by partners both within USAID and with external entities, such as other U.S. agencies and U.S. implementing partners.

USAID concurred with GAO’s recommendations, the report states.

Read the full report.