Published August 15, 2012
Inadequate oversight, lax bookkeeping, sloppy paperwork, haphazard performance agreements and missing financial documentation have plagued U.S. State Department spending of tens of millions of dollars to combat climate change, according to a report by State’s internal financial watchdog — and the problem could be much, much bigger than that.
The audit report, issued last month by the State Department’s Office of the Inspector General (OIG), casts an unflattering spotlight on a relatively obscure branch of the State Department that supervises climate change spending, and depicts it as over-extended in its responsibilities, unstaffed in critical monitoring posts, and more concerned with spending money than in monitoring its effectiveness.
The State Department branch is known as the Bureau of Oceans and International Environmental and Scientific Affairs and its Office of Global Change, or OES/EGC, which have become the nerve center of the Obama administration’s international climate change policy, and the epicenter of its foreign climate change spending, which continues to balloon despite serious economic problems at home.
The OIG report points to a host of lapses in the way OES/EGC has supervised climate change spending, based on what the OIG observed in a sampling of climate change projects between 2006 and 2010, when the overall spending tab amounted to some $214 million.
The OIG sampling involved $34 million of the total.
The picture painted by the OIG report is vigorously disputed by the State Department’s Assistant Secretary for Oceans and International Environmental and Scientific Affairs, Kerri Ann Jones, even as she accepted most of the OIG’s recommendations in her 10-page reply to the audit. Jones took over her post in August 2009, toward the very end of the period examined by the Inspector General’s office.
Since then, however, the situation may have gotten worse.
For one thing, the Obama administration’s spending on international climate change projects accelerated between 2010, when the OIG report ended its scrutiny, and mid-2012, when the report appeared — and continues today.
That spending spree has been based on its commitments at a variety of United Nations-sponsored climate change meetings, including the failed Copenhagen climate change conference in December 2009, and subsequent sessions in Mexico, South Africa and, most recently, the Rio + 20 U.N. summit conference on “sustainable development” in Brazil.
Through that process, the world’s developed countries have committed to spend some $30 billion annually on climate change projects in the developing world, with the U.S. a major contributor. (The first board meeting of a so-called Green Climate Fund that hopes to handle most of that money takes place starting on August 23.)
According to a State Department website, the U.S. has contributed some $5.1 billion in climate change funding to developing countries in 2010 and 2011 alone, with additional money still pouring forth in 2012.
Among the lapses highlighted by the OIG in its sampling:
The lack of a written demand for specific, reported results in the case of State Department grants became even more dramatic when the Inspector General’s Office examined another important financing tool, known as a “climate change inter-agency acquisition agreement” — essentially, the employment of another branch of the U.S. government to carry out commitments State has negotiated in areas ranging from defense to health to legal education.
The acquisition agreements are common for the State Department, where non-diplomatic expertise can be in short supply. During the period examined by the OIG, State spent three times as much -- $115 million — on the agreements, versus $34 million on grants.
If anything, the OIG report says, the quality and quantity of financial and other reporting in the State Department’s hands for such agreements, was even worse than for outright grants.
Among other things:
Starting in 2008, the OIG report notes, USAID, the U.S. government’s most active international helping agency, began charging a “General and Administrative Support Overhead Rate” of 23.7 percent for funds it administered under inter-agency agreements, including those in the climate change domain.
Thus, on two Indian grants totaling $10.5 million and administered by USAID over two years, the overhead fee was about $2 million. “Thus,” the report notes, “only approximately $8.5 million of the total was budgeted toward the execution of the [climate change] program.”
On examining the problem more closely, however, OIG discovered that the documentation wasn’t there because the Bureau of Oceans didn’t ask for it. The Bureau’s agreements with other agencies to carry out its work “did not include language that required recipients to maintain supporting documentation for financial expenditures and all pertinent achievements for purposes of substantiation.”
Or, as Assistant Secretary Jones put it in her letter reviewing the OIG report, when it comes to dealing with other Federal agencies, her Bureau provides only “guidance” on the details of performance reporting, while the agencies “are not required to perform project related accounting and are not subject to overhead auditing procedures.”
Overall, a State Department spokesman assured Fox News, in response to questions, the Bureau of Oceans is taking the OIG report and all its recommendations “seriously,” and is “working closely with the [State] Department in the development and implementation of new policies and procedures.”
The catch, however, is that in her letter, Jones promised to change many things more specifically — but only after officials located deeper in the State Department’s labyrinthine bureaucracy come up with “standardized policies for inter-agency agreements.”
And that could involve a much bigger problem. In discussing the lack of documentation with State Department officials early this year, OIG discovered that there are apparently no rules demanding that every part of the State Department handle and account for such inter-agency spending in the same way. And that includes “procedures for reviewing and approving agreements to ensure compliance with Federal and [State] Department requirements.”
The catch, therefore, is that OIG’s discovery about the Bureau of Oceans’ quirky and sometimes non-existent standards could be true across the entire State Department when it comes to inter-agency spending.
Or, as the inspector general’s report delicately put it, the accounting problems with climate change may “signify a Department-wide shortcoming, as inter-agency agreements may not be efficiently and effectively administered and managed in the areas of policy application, review and approval, and overall program management.”
That could mean discrepancies could involve much bigger bucks than have been examined so far, and well beyond the area of climate change.
According to OIG, in fiscal 2010 and 2011 alone, the State Department transferred some $4.6 billion to other U.S. agencies to perform work on its behalf, ranging from USAID ($968 million) to Defense (1.358 billion) to Justice ($558 million).
And while a working group within the State Department’s Office of the Procurement Executive ponders the issue prior to providing “guidance” for changes in the rules, the current procedures — or lack of them — for spending the money, at least when it comes to climate change, will remain in place.